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CHENNAI, Feb. 25

IDBI Bank has tied up with Bajaj Allianz General Insurance to offer unemployment insurance cover, along with its housing loans.

"In case our customer loses employment, up to three instalments (of the housing loan) will be covered. In the first year, IDBI Bank is absorbing the cost of insurance. Subsequently, the product can be extended to the period with which the customer is comfortable," said Mr Kumar Subramanian, Head -- Operations & Retail Assets, IDBI Bank. He added that unemployment insurance was novel in the country.

IDBI Bank believed that bundling unemployment insurance with a housing loan might spark an increase in the customer's risk appetite, and thereby a larger borrowing, said Mr Subramanian. The insurance package comes along with the bank's new scheme that allows customers to avail themselves of housing loans up to 110 per cent of the property value as against the traditional market practice of disbursing a maximum loan amount of 85-90 per cent of the property value.

A company press release said that the "innovation" in the scheme was the additional 10 per cent that will be given as a personal loan to customers towards purchase of durables.

The bank is holding an exhibition in Chennai between March 7 and 9, wherein builders and durable manufacturers will be invited.

Mr Subramanian said that IDBI Bank would approve loan applications at the venue, and disburse the same within three days subject to verification of documents. IDBI Bank intends to extend the exhibition to other cities.

According to Mr Subramanian, IDBI Bank has the highest productivity level among those in the housing finance business.

Currently, IDBI Bank's housing loan business operates in 14 cities and generates a monthly business of Rs 150 crore. "We intend getting into Tier II cities such as Bhopal and Nagpur, and are looking at a business of Rs 300 crore a month," he added. IDBI Bank's home loan division expects to do business to the tune of Rs 2,500-3,000 crore in fiscal 2004.

I-T benefits, grey area

THE equated monthly instalment (EMI) for a loan up to 110 per cent of property value will not be sub-divided into components, said IDBI Bank officials. A single EMI, therefore, would also include the cost of financing purchase of durables.

IDBI Bank officials claimed that the entire EMI would qualify for housing loan-related tax benefits. "We have sought opinion of income-tax experts, and there is a precedence to it," said Mr Subramanian.

According to Mr Subramanian, IDBI Bank will tighten provisioning norms for the extent of loan wherein the house is not the collateral. The bank will provision the entire amount not covered by collateral in the event a customer fails to honour his obligations for three months.

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