Banks not keen on NHB's rural housing proposal

National Housing Bank's (NHB) proposal to form rural housing finance arm has found no takers as banks find it financially unattractive.

According to officials close to the development, banks find disbursal and recovery of loans in rural areas cumbersome. NHB is now in talks with the corporate sector for the initiative.

Talks are on with interested companies with rural presence like the ITC group. NHB Chairman and Managing Director S Sridhar said, "NHB is interested in catalysing the setting up of rural housing finance companies (HFCs) in order to increase the flow of credit in rural areas."

He, however, declined to comment on the banks' reluctance to start such an initiative. In the proposed model for rural HFCs, NHB will have a small equity participation. Majority stake will be held by the corporate entity.

NHB is a wholly owned subsidiary of the Reserve Bank of India and is the regulator for all housing finance companies in India. The mandate for NHB is to promote housing finance market in India.

It also has equity participation in HFCs promoted by state-run banks. Now that the mandate of promoting housing finance in urban areas has been accomplished, NHB is keen to replicate its success in the rural areas, officials said.

NHB is providing housing microfinance through re-finance to banks, HFCs, and micro-finance institutions. It also directly lend to federations of self help groups, societies etc. The maximum amount given in the scheme is Rs 150,000 for a tenure of up to 10 years.