Indian Bank to merge housing arm by 2009

Indian Bank plans to merge its housing finance arm, Indbank Housing Ltd (IHL), with its parent bank within the next three years.

A source close to the development said the bank's housing subsidiary would be merged with Indian Bank by end of year 2009. IHL is in the process of recovering its bad loans, he added.

The housing arm of the Indian Bank has stepped up its bad loans recovery under the Securitisation and Reconstruction of Financial Asset and Enforcement of Securities Interest (Sarfaesi) Act.

As per market sources, the subsidiary expects to recover Rs 50 to Rs 100 crore using this Act.

IHL has already started issuing notices to the loan defaulters and expects the recovery to be completed within the next two to three years. However, the source informed that there was a possibility of winding up IHL even before 2009 if the bad loan recovery work gets completed swiftly.

It is also learnt that since Indian Bank has its own in-house housing finance division, it is not keen to continue with its separate housing arm.

Rather, it would like to consolidate its housing finance business by merging the housing arm with the parent bank.

The housing arm of Indian Bank had been in the red some time. In 2002, its losses stood at Rs 94.06 crore, which was pruned to Rs 33.01 crore by March 2006. However, in past six months ended September 30, 2006, the housing arm registered some profits.

Indian Bank is also coming out with its initial public offering (IPO) to raise approximately Rs 800 crore from the capital market at a price band fixed between Rs 77 and Rs 91 per share. With these, the bank will dilute 20 percent stake of the Centre, while retaining the remaining.