LIC Housing Finance likely to recover Rs 3,000 crore worth NPAs

LIC Housing Finance is likely to recover about Rs 3,000 crore from borrowers in the current financial year to improve asset quality, an uphill task in a year when the Indian economy is expected to contract.

The target is to get back about 50 per cent of gross non-performing assets (GNPAs), Managing Director and Chief Executive Siddhartha Mohanty said.

LIC HFC’s asset quality profile came under pressure with GNPAs rising to 2.86 per cent in March, from 1.54 per cent a year ago. Net NPAs also went up to 1.99 per cent, from 1.08 per cent. Its total outstanding portfolio stood at Rs 2.1 trillion in March, up from Rs 1.9 trillion last year.

LIC HFC’s provisions for expected credit loss stood at Rs 2,612.39 crore as of March 31, as against Rs 1,659.48 crore a year ago.

Mohanty said the asset quality might face further pressure due to risk slippages from part of the loan portfolio, which is under moratorium. At present, about 25 per cent of loan book is under moratorium. The RBI has permitted HFCs, finance companies, and banks to grant moratorium on term loans for EMIs till August to soften adverse effect on borrowers due to the lockdown.

While calculating expected credit loss, the company has taken into account its historical experience of losses, updated to reflect current conditions and moratorium.

 However, the company did not specify how much provision it has had to make for impact of Covid-19 pandemic.

As a step for reworking business, it will tweak operating model by increase business sourcing through direct market executives to 10 per cent of disbursements in 2020-21 from 4.96 per cent in 2019-20. It will take on board 1,000 DMA for captive business development work in Fy21. At present, it has 800 DMEs who which get business linked commission and stipend per month.    

Even as the situation is evolving, the company is focusing on maintaining asset quality and restarting disbursements and transitioning to a more technology-driven business process.

While it is difficult yp estimate business growth in FY21, the overall outlook for the economy and the housing finance segment to improve in another two-three quarters, Mohanty said.

Taking clue from running operations during lockdown, the company will further strengthen digital backbone. It is going for business process engineering to support one-line ecosystem. It will appoint advisor for BPR exercise in next few months. The BPR exercise is expected to be spread over about 18-month period, he said.