KOLKATA: Dewan Housing Finance Corporation is looking to raise up to Rs7,000 crore from banks, including State Bank of India, this fiscal by transferring its existing loan receivables as the housing financier plans to cut down borrowing from banks. Dewan Housing’s Chief Financial Officer Santosh Sharma told ET that the company is in talks with large public sector banks such as SBI and others to raise funds via this route. The process of transferring existing loans to banks is known as direct assignment of loans in financial parlance.
This is a form of securitisation of loans between two parties. It is a process of pooling in loan receivables and placing them with investors for raising funds.
The originator of the loan pays interest on it. The process helps the originator of the loans, in this case Dewan Housing, in unlocking capital and churning loan portfolios.
Sharma said loans worth Rs1,500 crore will be placed with banks in the second quarter to September. It has already raised Rs1,152 crore in the first quarter through such bilateral arrangement.
The Reserve Bank of India’s new priority sector rule has mandated banks to meet the lending target on a quarterly basis, instead of annual target practised earlier. The new norm has encouraged this market to grow from the first quarter itself. Sharma said banks are looking to take non-priority sector loans from housing companies to shore up retail lending books.
He said the fund is raised at 9.3-9.45% less than its average fund cost of 9.56%. The issuer also earns collection charges as it continues with the task of collecting repayment. In a recent presentation to investors, Dewan Housing said priority sector guidelines for affordable housing supports its strategy of doing more securitisation deals. The company’s off-balance sheet securitisation portfolio stood at Rs8,500 crore.
Dewan Housing’s loan outstanding stood at Rs63,800 crore at Juneend and the company has managed to lower its cost of fund by 43 basis points from 9.99% a year back by diversifying funding sources. “We will cut down banks loans and rely more of capital market for funds,” Sharma said.
Dewan Housing Finance to raise Rs 7k crore from banks
