Private sector bank, Laxmi Vilas Bank (LVB) has chosen to foray into the home loan business. This decision was taken by the bank due to its inability to compete in the increasing home loan rates due to high cost of funds.
Currently, the bank’s home loan portfolio comprises merely 3% of its total gross advances of Rs 6,413 crore, by the end of Q1 of this fiscal.
MD and CEO of the bank, Mr. P.R. Somasundaram said, as soon as its housing finance company (HFC) arm gets established, the bank will move out of home loan business and will just concentrate on associate loans.
The bank has submitted an application with apex bank, RBI about this issue.
A top official said, “HFCs can mobilise cheap resources via non-convertible debentures and get loans from banks. Moreover, they can also tap the National Housing Bank for refinance. Hence, HFC, in our case, is the best vehicle for undertaking the home loans business”.