Housing finance companies are likely to be the biggest beneficiaries of the Reserve Bank of India's (RBI) recent move of relaxing rules for non-banking financial companies (NBFCs) to sell or securitise their loan books, said Kotak Mahindra on Friday.
NBFCs can now securitise loans of more than five-year maturity after holding those for six months on their books, the RBI said. Earlier, they had to hold these assets for at least one year, a banker said.
“It is a positive step but the biggest relief will come to the housing finance companies (HFCs) because they are the companies which hold more than five-year assets. Other NBFCs, probably 8-10 percent of their portfolio will be longer than five-years but HFCs will have largely probably 80-90 percent of their book above five-years,” said KVS Manian, president - corporate, institutional and investment banking of Kotak Mahindra Bank.
“I would think this is a big relief at least for assets like commercial vehicle construction equipment and some portion of the tractors, which we normally do for five years. Definitely it is a big relief in the sense that now you need to hold it only for six months and also that you can retain 20 percent. So I think it should help these kind of high value assets, which normally are given for longer period,” said Ramesh Iyer, VC and MD of M&M Financial Services.
Speaking about the percentage of the book over five years, he added, “I would guess about 8-10 percent of the book and as we get to do more of commercial vehicle construction equipment, that book would possibly grow and it would be a great support to that segment of the product.”