NHB cranks up target for disbursements by 75%

The National Housing Bank (NHB) has raised its disbursement target for the year by 75 per cent from Rs 4,000 crore to Rs 7,000 crore. This is for the first time that the apex refinance institution has increased its disbursement target.

"We have already crossed the Rs 4,000 crore mark in December," said a senior official at NHB.

Total refinance disbursements during the period July 2004 to December 2004 (the institution follows a July-June accounting year) was Rs 4,121 crore "" close to five times the disbursement of Rs 885.9 crore during the corresponding period last year. About 60 per cent of this year's disbursements were towards banks while it had been a much lower proportion in the previous year.

Banks and housing finance companies are turning back to refinance to fund the growth with the boom in housing sector. As liquidity is drying up, home financiers are turning to the apex refinance institution in this sector, the National Housing Bank (NHB).

Refinance had gone out of vogue over the last 2-3 years as banks were flush with funds and did not have sufficient avenues for credit deployment.

But now with liquidity drying up and the incremental credit-deposit ratio over 100 per cent, most banks are in a tough spot as far as funding their asset growth is concerned.

"There is an acute demand for refinance for housing as banks are scurrying for funds. There is a lot of demand for rural housing and we expect the demand to continue," said the official.

Banks can turn to the NHB to grow only their home loan portfolio. Most banks are aggressively tapping the market to fund their other assets. According to market sources, Oriental Bank of Commerce recently took one-year deposit at an interest rate as high as 6.90 per cent.

Banks such as Uco Bank, ICICI Bank, Bank of India, Central Bank of India, Allahabad Bank, and associates of State Bank of India are said to be aggressively collecting bulk deposits at rates much higher than the rack rates. Three month deposits are fetching returns of over 6.50-7.00 per cent.