Deepak Parekh, President, HDFC, Real Estate News, ET RealEstate
Onboarding a home loan client takes a lot of effort and also comes with costs, Parekh said in his message to shareholders in the company’s 2020-21 annual report.
Customer retention is a sticky point for HFCs (housing finance companies), he said.
“Lenders are likely to lose their existing customers to other players who often entice them with lower interest rates or higher loan amounts. As there are no prepayment penalties on them. variable rate loans, a lender can repossess a home loan effortlessly, ”he said. .
For sales agents who are not tied agents, it’s a win-win situation as long as they receive twice the commission on the loan from the same borrower, Parekh said.
The president of the country’s largest mortgage lender further said that the loan balance transfer only shifts assets from one actor to another, and does not increase the loan or ownership to the level of the system.
“The problem is that integrating a mortgage customer takes a lot of effort and also comes with costs. . It would be a great comfort to all HFCs if this issue is addressed, ”he said.
The company’s individual loan disbursements performed well in FY21 and the recovery in demand was much faster than HDFC expected in the latter part of the year, he added. .
HDFC recorded 3 percent growth in its individual loan disbursements during the year.
Additionally, in today’s environment where the COVID-19 pandemic has exposed just how fragile life can be, he said there could be no better protection for a borrower than home loan insurance. and home insurance.
Likewise, given the risks associated with climate change and sudden weather events, home insurance becomes a key component of risk mitigation.
He suggested that the insurance loan for a home loan borrower be considered part of a home loan and could be classified accordingly, as it protects both the client and the HFC.
Currently, an insurance loan granted to a borrower is considered a loan other than housing. Also, taking out insurance is voluntary for a mortgage borrower.
Parekh also highlighted the problems that arise from a large amount of cash, saying the current regulatory framework “may have the unintended consequence of penalizing an HFC for maintaining excess cash”.
Larger amounts of cash are held by HFCs as a plentiful precaution.
“But maintaining higher liquidity should certainly not become the hindering factor causing HFCs to recalibrate their real estate and non-real estate portfolios in order to meet the prescribed minimum asset limits in housing finance,” he said. declared.
A minor adjustment that could exclude excess cash balances from total assets to arrive at prescribed limits would greatly help HFCs, he suggested.
In addition, the seasoned banker also called for a level playing field in terms of the same accounting standards.
This regulatory clarity helps minimize potential conflicts, he said, adding that there are often differences in the interpretation of regulations.
Pointing out that non-bank financial companies (NBFCs), including HFCs, follow Indian Accounting Standards (IndAS), which are still not aligned with prudential guidelines, he said this resulted in differences of opinion between the teams. inspection, regulated entities and even auditors.
“Banks and insurance companies haven’t migrated to IndAS, but it’s been three years since the NBFCs did so. While it’s not a level playing field, it may be prudent to at least resolve these issues opened as early as possible, ”Parekh said. noted.