Move largely benefits companies offering loans of maturity exceeding five years
Shares of home loan firms went up on Friday after the Reserve Bank of India eased norms for securitisation, which would help the companies raise more funds.
On Thursday, RBI decided to relax the Minimum Holding Period (MHP) requirement for NBFCs, as they are now allowed to securitise loans of more than five-year maturity, after holding them for six months on their books, as compared with one year earlier.
NBFCs involved in housing finance are the biggest beneficiary of the move, since such loans are extended for more than five years.
“In our opinion, this should be beneficial largely to HFCs only, because they have loans of maturity [exceeding] five years ,” Motilal Oswal Securities said in a report. The report said Dewan Housing Finance and Indiabulls Housing Finance would be the big beneficiaries among HFCs, since they had a higher share of off-balancesheet assets, compared to peers and their reliance on sell-downs, as means of fund-raising has been greater in these times of tight liquidity.
Shares of Repco Home Finance went up by 8.34% to close the day at 369.40, while Dewan Housing Finance stock rose 5.9% to close at ₹212.4. Indiabulls shares were up 2% and HDFC shares were up 1.4%.
“This is the much required step for providing fund-raising source for the sector grappling with the liquidity crisis,” Ramratthinam S, CEO, Muthoot Homefin (India) Limited.
“This relaxation would primarily benefit housing finance companies and NBFCs offering mortgage loans where the loan tenure is typically more than five years. Greater proportion of their loan book would now become eligible for securitisation,” Mr. Ramratthinam said. Sanjay Chamria, vice-chairman and managing director, Magma Fincorp, said while the liquidity situation had improved gradually during the last one month, the RBI decision would lend more confidence to the banking system and encourage banks to buy more portfolios and build their own retail book — something they have struggled to build.
“Therefore, it is win-win situation both for NBFCs and banks, and will lend more stability to the debt market, which is the need of the hour,” Mr. Chamria said.
