Twenty-one housing finance companies have assessed their fund requirements during the fourth quarter at around Rs 40,000 crore (Rs 400 billion).
But their plea for fresh measures to boost their liquidity has not found favour with the National Housing Bank, which assessed their fund requirement in the last week of December.
Sources at NHB said the measures initiated by the Reserve Bank of India appeared sufficient for the requirements.
They pointed out that the central bank has already announced a refinance window of Rs 4,000 crore (Rs 40 billion), while around Rs 15,000 crore (Rs 150 billion) will be made available by banks. Last month, RBI allowed banks to treat loans up to Rs 20 lakh (Rs 2 million) extended to HFCs for on-lending to individuals as a priority sector advance. This will help the housing finance companies get more access to funds, an NHB official said.
The agency will provide up to Rs 400 crore (Rs 4 billion) to each HFC that accesses the special refinance window. The money has to be used to extend loans up to Rs 20 lakh (Rs 2 million). So far, LIC Housing Finance has tapped the window to raise Rs 300 crore (Rs 3 billion).
About 63 per cent of the loan portfolio of HFCs consists of loans up to Rs 500,000, while a major portion of HDFCs loan book is under Rs 20 lakh (Rs 2 million).
In addition, the sources said that Rs 1,000-2,000 crore (Rs 10-20 billion) will come through overseas borrowings. External commercial borrowing proposals from Deutsche Postbank Housing Finance ($40 million) and GE Money have already been approved and a few more proposals are in the pipeline.
"We do not see a problem at present as the liquidity situation has improved, banks are getting back to lending and with the latest steps from RBI, interest rates will fall further. The companies can raise the remaining amount through bonds, public deposits and fixed deposits. If, at a later date, there is a crunch, we will deal with the issue," an official said.
On their part, HFCs are keen that they get more refinance since NHB can access funds through the repo route at 5.5 per cent and lend to the companies at 7-7.5 per cent. At present, the cost of funds for an HFC was around 10 per cent, a source at one of the companies said. "With this kind of cost of funds, it is difficult to compete with banks, especially public sector players as they are charging 9.25 per cent for loans up to Rs 20 lakh (Rs 2 million)," another executive added.
The government should provide a liquidity window of at least Rs 20,000 crore (Rs 200 billion) to help HFCs meet their disbursement needs and make up for the repayment of debt raised over the past few quarters, said a company executive who did not wish to be named.
