Path paved for SBI Home closure

National Housing Bank (NHB), the housing finance regulator, has finally cleared the way for the closure of ailing SBI Home Finance (SBIHF) by serving a show-cause notice on it.

In a parallel development, HDFC, the second single-largest shareholder after the SBI group in the company, has offloaded its entire 13 per cent stake in the company in three tranches.

NHB, in its show cause notice has asked SBIHF as to why the certificate of registration issued to it should not be cancelloed under certain sections of the National Housing Bank Act, 1987, in light of disclosure in the company's annual report for the year ended March 31, 2004, that SBI Home Finance was no longer a going concern.

Questions on the status was raised because the net worth of the company stood totally eroded and the total liability exceeded its total assets.

The net owned funds of the company stood at Rs 230.35 crore (negative) and housing loan portfolio was nil as on March 31, 2004.

The company's branches had also been closed down and all the employees have been voluntarily separated.

Further, the company was incurring losses for past several years, mainly on account of high non-performing assets. The accumulated losses increased from Rs 82.35 crore as on March 31, 2001, to Rs 248.11 crore on March 31, 2004.

SBI Home finance has, however, said that it would be responding to the show cause notice appropriately.

Meanwhile, HDFC has informed that on August 13, it has sold off 2.88 per cent of its holding SBI Home Finance, followed by another tranche in 17 August "" where it offloaded 4 per cent in the open market. While sometime back it sold off its remaining stake at 7.12 per cent in the open market.

The SBI group holds around 26 per cent in the company which is divided at 13 per cent each among, SBI Caps and State Bank of India.