Armed with Crisil's AAA rating, NHB to raise Rs 4,000 cr via NCDs

The National Housing Bank (NHB), a housing sector refinancing body, plans to raise up to Rs 4,000 crore through non-convertible debentures (NCDs).

The NHB has robust asset quality and healthy capitalisation. But, these strengths are partially offset by an average earnings profile, given the institution's developmental role in the housing finance sector, CRISIL said in a statement.

The rating agency has assigned a ‘AAA/Stable’ rating to the non-convertible debentures of the NHB. It has also reaffirmed its ratings on the existing debt instruments and bank facilities at ‘AAA/FAAA/Stable/CRISIL A1+’.

The ratings continue to reflect the support the NHB receives from the central government on account of the bank’s key policy role in the housing finance sector.

The Reserve Bank of India (RBI) sold its entire stake in the NHB to the government for Rs 1,450 crore. With this divestment, the government now holds 100 per cent stake in the NHB with effect from March 2019.

In July 2019, government gave the RBI the power to regulate housing finance companies (HFCs). The NHB, a financial institution, will continue to carry out supervisory and refinancing activities, and will also play a key policy role in the housing industry.
 

The NHB extends refinance support to HFCs, scheduled banks, regional rural banks, state apex cooperative housing finance societies, and state cooperative agriculture and rural development banks. Additionally, it manages the rural housing fund and the urban housing fund.

Its outstanding loans under refinance support were Rs 69,805 crore as of June 30, 2019.

It has robust asset protection mechanism and the asset quality remains robust, with gross non-performing assets (NPAs) remaining low at 0.01 per cent as of June 30, 2019 (0.01 per cent as on June 30, 2018).

The provisions towards gross NPAs were 100 per cent. The institution has obtained mandates from scheduled banks, regional rural banks, and urban cooperative banks to directly debit their current accounts with the RBI if there is a delay or default in payment of refinance instalments. Moreover, funds are primarily extended to HFCs with strong credit worthiness.

NHB’s capital base is healthy, with a sizable net-worth of Rs 6,651 crore and above-average Tier-I capital to risk assets ratio (CRAR) of 14.8 per cent as of June 30, 2019. The overall CRAR was 16 per cent as of June 30, 2019 (18.7 per cent as of June 30, 2018).