National Housing Bank runs into house of troubles

National Housing Bank (NHB) has run into a major controversy with allegations surfacing against the top management for allegedly doling out higher subsidies to private housing finance companies (HFCs) by deliberately jacking up their ratings.

According to sources, a complaint has been sent to Union finance minister P. Chidambaram, financial services secretary Rajiv Takru, the Chief Vigilance Commissioner and Reserve Bank of India alleging that R. S. Garg, executive director at NHB and the second senior- most officer- next only to chairman and managing director (CMD)- has been indulging in irregularities.

The complaint alleges that private sector companies are being given higher subsidies that public sector companies despite the better track record of the latter.

"If we look at the distribution of subsidy, there is a lot of discrimination between private and public sector HFCs. HFCs with a good track record of inclusive lending are unfairly discriminated against by NHB," the complaint to the finance minster states.

Garg has been accused of manipulating ratings of HFCs that determine subsidy entitlement to the housing companies.

When Mail Today contacted Garg's office for his comments, he refused to come on line. Strangely, when asked to comment on the issue, outgoing NHB CMD R. V. Verma told Mail Today that "there is nothing like rating HFCs". However, another top NHB official confirmed that NHB rates HFCs on the basis of which the quantum of subsidy is decided for each entity.

A senior official at LIC Housing Finance Ltd (LICHFL) disclosed that the public sector company has not grown as much as they expected due to too much leverage given to private HFCs by NHB, which is the regulator for non- banking HFCs.

"But we are in the market and we have to face these issues," the LICHFL official said.

Besides weak finances, NHB has largely failed in making mortgage guarantee operational, which will make HFCs more self- reliant and away from the domain control of NHB. Despite many multinational agencies willing to offer facilities like covered bonds, rating enhancement, NHB has largely evaded and not disclosed many facts in the public domain, including its ratings of HFCs, the complaint alleges.

There is a complete lack of transparency in the way the financial support from KFW Germany or other multilateral institutions are used both in lending programmes as well as for promotional activities, the complaint added. The complaint points out, " NHB's poor performance has been brought out in its annual report on some schemes like refinance for low income housing or installation of solar water heating." NHB's nonperforming assets, or bad loans, have gone up to Rs 185 crore for the half- year ended December 31.

Despite many multinational agencies willing to offer facilities like covered bonds, NHB has not disclosed many facts in the public domain, including its ratings to HFCs.

Outgoing National Housing Bank CMD R. V. Verma has said there is nothing like rating housing finance companies.

NHB's bad loans rose to Rs 185 cr for the half- year ended December 31.

Courtesy: Mail Today