Life Insurance Corporation (LIC) plans to sell its employee housing portfolio worth Rs 1,300 crore to its mortgage arm, LIC Housing Finance (LICHF), according to a senior executive of the home finance firm.
The portfolio has around 25,000 accounts. In future, all home loans provided by LIC to its employees will be originated by the home finance arm.
“Since LIC has about 1,00,000 employees, we can expect steady business from them. We expect at least Rs 300-400 crore business from LIC employees every year,” said RR Nair, director and chief executive of LICHF.
LIC provides loans to its employees at subsidised rates. Specific slabs have particular rates of interest. The higher the slab, the higher is the rate of interest. Recently, LIC widened the slabs to make home loans more attractive to its employees.
“LIC has doubled the cap for each slab. We expect more employees to avail of these loans,” Nair said.
Another advantage was that these loans were virtually risk-free as they were guaranteed by LIC, Nair added. Any defaults will be adjusted against salary.
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For LIC, the advantage is that it need not tie up resources in origination and servicing of its home loan portfolio.
LICHF has a loan book of Rs 34,000 crore and aims to grow at a rate of at least 30-35 per cent in the current financial year. It aims to expand its portfolio to Rs 50,000 crore by the end of the current financial year.
LICHF Finance recorded a 35.51 per cent rise in net profit for the quarter ended March 2010 to Rs 213.51 crore on the back of strong growth in disbursals.
Total income rose to Rs 962.94 crore for the fourth quarter ended March 31 compared with Rs 790.47 crore during the previous corresponding period.