Can Fin gets up, close and personal

Can Fin Homes plans to offer personal loans to its existing home loan customers with a clean two-year credit track record to boost its earnings.

As competition in home loans has become very fierce, the non-banking finance company is banking on this offering to counter its thinning spreads.

The NBFC, like its peer competitors, is working on wafer-thin spreads (about 1.2 per cent). Its foray into personal loans, which carry an interest rate of 13 per cent a year, is with a view to boost the spread (net interest margin).

"From July we will offer our home loan customers, who have a two year clean credit record, a personal loan of anywhere between Rs 25,000 and Rs 2 lakh for five years. The loan will carry an interest rate of 13 per cent a year," Peter D F Cardozo, managing director, said.

The company hopes to bring down its cost of funds, which stood at 7.6 per cent as of March-end 2004. Further, the incremental cost of funds has come down as the National Housing Bank has pared the refinance rate to around 6.2 per cent.

The housing finance company, which posted a lower net profit of Rs 20.70 crore in 2003-04 (Rs 21.58 crore in 2002-03), is on the verge of tying up with a life insurance company to offer its existing as well as new customers term-loan insurance linked to home loans.

Can Fin has set a target of Rs 650 crore for sanctions and Rs 550 crore for disbursals in 2004-05. In 2003-04, the sanctions were at 467 crore (Rs 425 crore in 2002-03) and disbursals were at Rs 395 crore (Rs 360 crore).