Housing firms serenade pros, banks avoid them

Food for one financial intermediary, it seems, is poison for another. Housing finance companies (HFCs) are wooing professionals like lawyers, doctors, chartered accountants and architects with both hands to disburse loans. While the same class of professionals "" especially lawyers "" are being treated as pariahs by commercial banks.

The reason: banks operate through direct sales agents (DSAs), while HFCs are very particular in meeting customers before the disbursement of any loan product.

"The majority of our loans are sourced directly through our branches, and even when we source loans through DSAs, we still insist on meeting the customer before the actual disbursement," said Suresh Menon, general manager, Mumbai region, Housing Development Finance Corporation.

Many banks issue negative lists primarily because they tend to rely on DSAs to source home loans, and verifying agents for the verification.

As such, the bank does not necessarily know each of its customers. Recently the Delhi-based rating agency, Icra, in its report on the housing finance industry, stated that some players lack an effective control over the distribution channels, which in turn results in lower credit quality borrowers being included or frauds being committed.

This explains the existence of a negative list issued by banks when sourcing retail loans. Aside from lawyers, even professionals like journalists are often shunned. Interestingly, single-women taking home loans do not fall under the "accepted" category.

"We go by the merits of each case, as we do not believe in generalising any single group as being a bad risk," said Menon.

Today there is lack of adequate information in terms of credit risk of borrowers. Once Credit Information Bureau (India) Ltd (CIBIL) become more active, the concept of negative profiling is not prove necessary.

At HDFC professionals like lawyers, doctors, chartered accountants and architects are in fact given preferential treatment. This class of professionals are the only ones to be offered loans for setting up their clinics, law firms and office premises. Their income is regular and they generally opt for high-value loans of Rs 10 lakh and beyond.

Like banks, even HFCs are cautious when it comes to lending to the business community. "The business class has the ability to manipulate their earnings, which can even get wiped out on account of cyclical reasons. While we do not shun them in toto, we undertake extra checks on their ability and willingness to repay loans," said a senior official with a HFC.

However, this community including shop-keepers cannot avail of loans against business premises, he added.