Financial Daily from THE HINDU group of publications
Wednesday, May 07, 2003
Financial Daily from THE HINDU group of publications Wednesday, May 07, 2003 |
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Money & Banking
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Housing Finance SBI Home Fin may cease to exist P. Devarajan
SBI Home Finance is being wound up, with the State Bank of India (SBI) deciding to take the hit while writing off losses. The housing company is not a subsidiary of SBI though SBI and SBI Caps together hold 25 per cent stake, with HDFC having 15 per cent to its name. LIC and other insurance companies hold around 30 per cent, with the rest being held by the public. Winding-up details are not yet out even as top officials in SBI confirm the development. Around this time last year, SBI Home Finance had stopped lending operations with efforts focussed on recoveries. At that point, SBI did think of putting in recap funds, but Reserve Bank of India stepped in to get the other stakeholders share the burden. That did not happen. Apart from bad lending, SBI Home Finance could not access retail deposits and found it hard to match the interest tags on housing loans set by SBI. In August 2002, SBI was okaying 5-year housing loans at a floating rate of 9.50 per cent with the fixed rate being 9.75 per cent. SBI Home Finance was offering floating and fixed rates on 5-10 year loans at 10 per cent and 10.25 per cent. Today, SBI's rates are down to 8.75 per cent on a five-year housing loan with the 10-year loan bearing 9.25 per cent. "In a couple of months there may not be any SBI Home Finance,'' top SBI sources admitted. When RBI came out with the advisory to banks to trim subsidiaries, many were upset though it made sense. Most banks have gilt funds even as the parents have strong treasuries; gilt funds do not have the advantage of tapping savings deposits at 3.50 per cent, which their parents have. At the same time, the central committee of SBI has decided to integrate loan processing with its seven associates. It could be on the lines of unifying treasury operations of SBI and its associates done last year. SBI and its associates could centrally clear high-value loans of Rs 10 crore and above to speed up processing and also lend credence to the loan portfolio of the SBI group. Loan processing time could be cut down to three months. The move could be the next best solution to a merger of the seven associates with SBI, which may not happen for quite a long time. Going by chat on Mint Street, not one MP is keen on getting the RBI or the Centre out of SBI. At least some of them are not averse to Government stake coming down to 33 per cent in nationalised banks. Even the idea of RBI transferring its majority stake to the Centre has not many takers as the Finance Minister does not see any merit. RBI, as regulator, is uncomfortable being a majority stakeholder in SBI, but not Mr Jaswant Singh, the Finance Minister. In fact, Mr Singh,has not taken a full meeting with bankers whereas for Mr Yashwant Sinha, a meet was a must every six months. Possibly, the best news coming out of New Delhi is the idea to downgrade the post of Secretary, Banking. The banking department has no role to play and needs to be scrapped, as RBI is sufficient enough.
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