The National Housing Bank (NHB) stepped in to bail out cash-starved housing finance companies (HFCs) by disbursing a record Rs 25,000 crore to them in just four months through June, after crisis-hit mutual funds began trimming their exposure to realty and bankers remained risk-averse in the wake of the Covid-19 outbreak.
This was 91% of Rs 27,500 crore that the state-run re-financier handed out to HFCs in its last fiscal ended on June 30.
In fact, the NHB extended a total refinancing facility of a record Rs 31,250 crore in its last fiscal, up 24% from the year ago. Of this, as much as 88% (about Rs 27,500 crore) went to HFCs and the rest to banks and others against their housing portfolio, according to the latest data compiled by the NHB.
Importantly, in a much-needed change in times of the pandemic, the funds lent to HFCs in the last fiscal (July-June) defied the NHB’s traditional exposure pattern, which was almost evenly spread between HFCs and banks. As of June 2019, as much as 47% of NHB’s cumulative outstanding advances of Rs 2.37 lakh crore went to banks, while HFCs accounted for 51%, according to its annual report for 2018-19. More importantly, the NHB funds were made available to over 30 small HFCs, with loan book of less than Rs 1,000 crore each. It lent to 22 new HFCs and four small finance banks, which helped it expand its refinance portfolio by 20% year-on-year.
The funding woes for the entire shadow-banking sector, including HFCs, flared up after the IL&FS crisis in September 2018. Banks, as such, remained cautious in lending to non-banking financial companies (many of whom were facing solvency issues), even when the system was awash with liquidity.
The risk-aversion among mutual funds towards shadow-lenders hit a peak after Franklin Templeton wound up six of its debt schemes, with a combined size of Rs 25,856 crore, in April. The pandemic just exacerbated the fund-raising issues of small HFCs, even though the large ones could still lay their hands on finances from various sources, mainly state-run banks. Against this backdrop, the disbursement by the NHB remains crucial, especially for small players, as it complements the government’s efforts in making loans available to the needy.
The NHB disbursed funds (Rs 31,250 crore last fiscal) under its various refinance schemes, including the liberalised refinance scheme, the liquidity infusion facility and the special refinance facility.
Importantly, under the Rs 21-lakh-crore Atmanirbhar Bharat package announced recently, the NHB was provided a special liquidity facility of Rs 10,000 crore by the central bank to obviate the pandemic-related issues faced by the housing finance sector. It sanctioned loans of Rs 9,992 crore to 53 HFCs, regional rural banks and other bodies, of which Rs 9,537 crore was already disbursed before June 30.
Separately, as a nodal agency for the credit-linked subsidy scheme under the Pradhan Mantri Awas Yojana (Urban), the NHB disbursed Rs 7,571 crore as subsidy to 3.32 lakh households through primary lending institutions in 2019-20. Cumulatively, as of June 30, the NHB disbursed such subsidy worth Rs 21,633 crore to 9.55 lakh households.
The state-run refinancier has also donated an amount of Rs 2.5 crore to the PM-CARES Fund. Its officers have also contributed their one-day salary amounting to Rs 3.80 lakh to the Fund as well.