“There is (a) massive opportunity that is going to come up in India on the affordable housing side and loans less than Rs 2 crore.” PNB Housing chief executive Hardayal Prasad said.
This segment does not depend on the rise and fall of economic cycles, unlike the corporate side of housing loans, Prasad said during his interaction with analysts after the announcement of quarterly earnings.
The affordable segment contributes merely 9% of the lender’s retail loan disbursements. The size of its affordable portfolio stood at Rs 2,986 crore at the end of June, which is a little over 4% of its assets under management (AUM) of Rs 71,828 crore.
On the co-lending opportunity, Prasad said that discussions are underway with other banks, besides its existing tie-up with
“This will help us in generating fee and cross-sell income besides expanding our customer base, with minimal capital consumption. The model will also help us on-board prime customers,” Prasad said.
The Securities Appellate Tribunal, which was weighing market regulator Securities & Exchange Board of India’s objection over PNB Housing’s proposed Rs 4,000-crore capital-raising, has given a split verdict on the matter and directed the lender not to declare the voting outcome on the preferential allotment resolution.
The lender had been looking to raise capital for the last two years, and it has been compelled to adopt a strategy of conserving capital because of its failure to raise funds until now. The lender has already been in the process of reducing its weightage on corporate loans. The risk weight associated with corporate loans is 100%. Risk weight for retail books is 50%. This means lenders need to assign lower capital for retail loans.
The focus on retail and fall in corporate loan share helped the company improve its capital adequacy ratio to 21.4% at the end of June from 14% as on March 2019, without any capital infusion from outside.
“We are looking into other opportunities to enhance our avenues in the form of fee income, in the form of co-lending opportunities as well which gives an addition on our fees without stepping on our capital,” chief financial officer Kapish Jain said.
The corporate book offers higher returns but PNB Housing is now looking for stability.
The lender has begun a process to realign its branch set-up to cater to the affordable housing segment. It has created a separate vertical for the affordable housing segment and has identified 13 locations in Tier2 and Tier-3 cities. These centers will be additions to its existing 94 branches across 64 cities and towns.