The Hindu : KSFC enters housing finance sector

Online edition of India's National Newspaper
Monday, Dec 23, 2002

Southern States

Southern States - Karnataka

KSFC enters housing finance sector

By S.Rajendran

Bangalore Dec. 22. The Karnataka State Financial Corporation (KSFC), considered a premier State-run financial undertaking, has entered the housing finance sector in a big way.

Financing the housing and services sector is now considered a buoyant and niche market by several commercial banks, particularly those in the private sector. Offering a competitive interest rate, the KSFC has entered this sector, and its target is to finance the group-housing sector.

The Managing Director of the KSFC, V.Umesh, told The Hindu that nearly a half of the annual financing by the KSFC would now be towards the housing sector, the health care sector, and the educational sector.

As per the KSFC's plan of action for the current financial year, of the Rs. 350 crore to be extended as loans, nearly Rs. 150 crore would be for the three new sectors that it had entered in the past few months.

He said: "The KSFC has to compete appropriately in tune with the market conditions, to at least stay afloat in the volatile finance market more than being one-up. The thrust now is on the housing sector since financing is much more guaranteed and the recoveries better. The engineering and manufacturing sector will, however, continue to be the core financing segment of the KSFC."

Mr. Umesh said that the KSFC had also commenced financing educational institutions — from the kindergarten level to professional colleges. The repayment schedule had been worked out in such a way that it should not be a limiting factor to any educationist. The KSFC would also extend assistance for modernisation of schools and colleges.

In the health sector, apart from financing large hospitals, the KSFC had started financing small medical clinics, laboratories, and nursing homes. Finance would also be extended to modernisation of healthcare centres. It had also entered the information technology sector and was extending finance to large and small information technology parks, apart from private software and hardware ventures, he said.

Referring to financing of housing schemes, Mr. Umesh said the KSFC recently organised meetings with the Karnataka Ownership Apartments Builders' Association and associations of private developers, builders, and contractors.

"The response has been tremendous, and we have already received several applications from established developers and builders. The KSFC will, however, refrain from financing individual houses since it was a cumbersome process. The aim is to finance apartment builders. It is for the builders to sell the individual flats and repay the KSFC," he said.

Mr. Umesh said the KSFC's performance had largely improved over the past two years, and the sanctions and disbursements were on target while it was marginally lagging behind in recovery. It had sanctioned Rs. 185 crore loans so far in the current financial year, and of this the disbursements were around Rs. 165 crore. The target for recovery was Rs. 280 crore till November, and of this, Rs. 230 crore had been recovered. The plan was to step up recovery and achieve the target of Rs. 500 crore before the end of the year. Towards reducing the high establishment costs, the KSFC would shortly introduce an attractive voluntary retirement scheme, he said. The plan was to reduce the employee strength in phases, from the present 1,325 to around 500.

Computerisation, and streamlining the functioning of various wings, apart from a big reduction in paper work had prompted the authorities to reduce the workforce, more so since the wage bill was quite high in relation to the worth of the per capita output. Mr. Umesh said that the KSFC would also open a new wing called "Asset reconstruction and asset management activity."

The asset reconstruction activity pertained to non-performing assets and the asset management activity pertained to motivating well-run business firms and factories to modernise and expand.

Focussing on asset reconstruction activity would go a long way in enabling the KSFC to reduce bad debts.

The Union Finance Ministry and the Reserve Bank of India had advised financial institutions, including commercial and cooperative banks, to independently work towards asset reconstruction and asset management.

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