Allow housing finance organisations to just accept demand deposits from big investors


To enable housing finance organizations to complete extra effectively with banks at the interest price the front, they ought to be allowed to get admission to call for deposits from huge investors such as companies and high net worth people, according to Kapil Wadhawan, Chairman and Managing Director, Dewan Housing Finance Corporation.

Housing finance corporations (HFCs) have a long-standing song document servicing retail time period deposits of over 12 months. So, he stated that there is no reason they will not be able to service calls for (financial savings/current account) deposits of big investors. Wadhawan observed that building societies inside the UK now offer home loans and take financial savings deposits.

Housing finance enterprise professionals think that if the regulators (Reserve Bank of India and National Housing Bank) permit HFCs to take calls for deposits from huge buyers, there won’t be a need to tweak the extant suggestions for preserving the statutory liquidity ratio (SLR).

SLR is the part of public deposits that an HFC has to invest in authorities’ securities necessarily. Currently, the SLR requirement for HFCs is 12.50 in step with the scent of the public deposits. For banks, the SLR is at 20 percent in their net demand and time deposits.

The demand for being allowed to faucet demand deposits comes inside the context of the fee of funds of HFCs being an awful lot better than that of banks. For example, as of March-cease 2017, DHFL’s budget fee changed into 8.83 according to cent while for State Bank of India, it was 5.88, consistent with the scent.

Allow housing finance organisations to just accept demand deposits from big investors 12

HFCs’ fund resources include a line of credit from banks and monetary institutions, capital market instruments (non-convertible debentures, non-public placement of subordinated debt and perpetual debt tool, and commercial paper), fixed deposits (of over 365 days duration), re-finance from National Housing Bank and External Commercial Borrowings. The DHFL honcho stated: “You observe a cooperative financial institution’s asset class, and also you examine our asset class. There is a stark distinction (in terms of non-performing property).” So, whilst co-operative banks are allowed to accept deposits, HFCs also have to be allowed to mop up financial savings deposits, albeit from massive traders, he added.

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Not easy to build

To a question whether DHFL will take into account making use of for a banking license, Wadhawan said: “I assume we’re quite cozy with what we are doing currently. We do accept deposits. It is not clean to build a bank from scratch. It takes time. In banking, he stated, there is a robust regulatory course on the kind of assets an entity can create, and garnering deposits/ financial savings from the marketplace isn’t always easy. “It isn’t always easy to construct that (banking) franchise. And extra importantly, you need to have a logo. So, I think we as a housing finance employer are today at the forefront of supplying value-adds to our clients even without being a bank,” he said.

“We do offer SME (small and medium enterprise) loans. We do provide housing loans. And those are at as aggressive prices as you could get inside the marketplace, from even the banking gadget. So, we accept as true that this (housing finance) is a centered commercial enterprise, and it’s far vital to stay centered. We are constructing our e-book in the system…. So, sure, we will technique the RBI with our request (for a bank license) at the opportune time. Wadhawan stated with the aid of the stop of the cutting-edge financial yr, DHFL might go ₹1 lakh crore of property below control, which as of June quit 2017 stood at ₹88,236 crores.

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