The Reserve Bank of India (RBI) has given in principle approval to Corporation Bank to set up a housing finance company.
The authorised capital of the subsidiary will be Rs 25 crore with an initial paid-up capital of Rs 10 crore.
Corporation Bank will initially hold 100 per cent of the equity capital of the subsidiary.
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The bank is also planning to invite equity participation of premier housing finance institutions like the National Housing Bank, Housing Finance Development Corporation, Hudco Ltd, and Unit Trust of India, after obtaining prior approval from the RBI.
The subsidiary will be headquartered at Bangalore. It will primarily operate in metros and other major cities, although in the first phase it will cover metro cities.
It will extend financial assistance for housing to individuals, corporates and builders. Of its advances, 70 per cent will be to individuals, 25 per cent to corporates, and five per cent to builders.
The proposed lending operations include long term finance to individuals, corporate bodies and co-operative societies, loans for purchases of readily promoters etc and short-term finance to construction companies.
The primary source of finance to the subsidiary would be from deposits raised from the public and borrowings from other commercial banks, apart from the refinance assistance from NHB.
With its own mobilised resources, the bank expects the subsidiary to become viable.
In its coming meeting, the board of directors of the bank will approve the organisational structure of the subsidiary and its business plan for the next 12 months.