National Housing Bank to seek nod for raising funds thru ECBs

Mr R.V. Verma

Source : BL:K.R. SRIVATS:NEW DELHI, SEPT. 30: 2011

National Housing Bank (NHB) wants to be the housing sector's window for external commercial borrowings (ECBs). It wants to pass on benefits of ECBs, including low cost, to the housing-finance sector without transferring any risks.

Towards this end, NHB will soon approach the Finance Ministry and the Reserve Bank of India (RBI) to allow it to raise ECBs, Mr R.V. Verma, Chairman and Managing Director, NHB, toldBusiness Line in an interview here.

Currently, ECBs are not permitted for the housing sector. NHB, too, cannot raise funds through ECBs, but is allowed foreign-currency borrowing from multilateral bodies after obtaining approvals of the Government and the RBI.

“We are not doing external commercial borrowings now. That is what we should be allowed to do. We should have an option to raise money in the external market. Because…there are certain benefits in the international markets.

We should be allowed to tap the international market and transfer the benefits to the domestic housing-finance system. All the risks will be hedged at our level and rupee funds will be passed on to the housing-finance companies (HFCs),” he said.

Mr Verma made it clear that NHB was only looking to transfer benefits of ECBs and not associated risks. He also said NHB was keen to raise funds through ECBs only for HFCs and not for commercial banks.

The NHB chief saw merit in allowing the local housing-finance system to raise ECBs, especially when 100 per cent foreign equity is allowed in such companies.

FUND RAISING

On fund raising from multilateral institutions, Mr Verma said NHB is talking to the World Bank for $350 million loan assistance from its International Development Association to help low-income households by way of credit to HFCs on the condition that it is used only to build houses. This loan assistance will help NHB improve its asset-liability management, he said.

“Our borrowings in India is mostly not very long. Long-term funds are not available while we are expected to lend long. Low- and moderate-income housing require long-term funding. The funds that we expect from World Bank are long-term and, therefore, we can also do more long-term funding for low- and moderate-income housing,” Mr Verma said.