Indian Bank has announced the winding up of its subsidiary, Ind Bank Housing Ltd, after the Reserve Bank of India (RBI) cancelled the certificate of registration (CoR) for the Housing Finance Company (HFC). The subsidiary, which had been non-operational for the past two decades, faced ongoing challenges, including mounting non-performing assets (NPAs). Indian Bank's Managing Director and CEO, S L Jain, emphasized that the decision to wind up the subsidiary is final, as the bank has entered the housing loan market itself, rendering the subsidiary redundant. Despite challenges, Indian Bank has reported strong financial results, including substantial growth in net profit and advances, and effective NPA management through recoveries from corporate clients.
Indian Bank, a prominent public sector bank in India, has announced the winding up of its subsidiary, Ind Bank Housing Ltd, following the cancellation of the certificate of registration (CoR) of the Housing Finance Company (HFC) by the Reserve Bank of India (RBI). This decision to wind up the subsidiary marks the end of a long and challenging journey for Ind Bank Housing, which had been non-operational for the past two decades. Indian Bank's Managing Director and CEO, S L Jain, made this announcement during a press conference in Chennai, shedding light on the reasons behind this significant development.
Ind Bank Housing Ltd, in which Indian Bank holds a majority stake of 51%, was established in 1991 with its registered office in Chennai. Its primary objective was to provide housing loans to individuals, a segment that holds immense significance in India's financial landscape. However, over the years, the HFC faced numerous challenges, with its difficulties escalating since the year 2000 as non-performing assets (NPAs) began to mount.
The RBI's decision to cancel the CoR of Ind Bank Housing Ltd was a culmination of these ongoing issues, effectively putting an end to the struggling HFC. This move prompted discussions about the possibility of reviving the HFC, but Mr. Jain made it clear that the decision to wind it up was final. He also pointed out that Indian Bank had entered the housing loan market itself, further underscoring the redundancy of maintaining the subsidiary.
In a broader context, Indian Bank has been witnessing positive financial results in recent quarters. During the quarter ending on September 30, 2023, the bank reported its highest year-on-year net profit of Rs 1,988 crore, representing a substantial 62% increase compared to the corresponding quarter in the previous fiscal year (FY23). This remarkable growth can be attributed to a 23% increase in net interest income during the second quarter of FY24 when compared to the same quarter in the previous year.
Additionally, Indian Bank experienced a 12% year-on-year growth in advances, with a total value of Rs 4,92,288 crore at the end of the quarter ending on September 30, 2023. The bank's overall business operations reflected a healthy state, with a total business of Rs 11,33,091 at the end of the same quarter in 2023.
Despite these positive trends, the bank did encounter fresh slippages during the July-September quarter of FY24, amounting to Rs 1,976 crore. Notably, a significant portion of these slippages, specifically Rs 570 crore, was attributed to corporate clients located in Odisha and Chennai. These corporate clients were primarily involved in sectors such as power generation.
However, there is a silver lining in this scenario as well. Jain highlighted that the bank had successfully managed to recover Rs 2,265 crore during the same quarter, which exceeded the value of fresh slippages. This indicates a proactive approach to managing NPA challenges and a commitment to maintaining a healthy loan book.
In conclusion, Indian Bank's decision to wind up its subsidiary, Ind Bank Housing Ltd, reflects the changing dynamics in the Indian banking sector and the bank's own evolution in the housing loan segment. While challenges persist, the bank's overall financial performance remains strong, with substantial growth in net profit and advances, as well as effective management of NPAs through recoveries from corporate clients. This signals a bank that is adapting to market conditions and striving for sustainable growth in a dynamic economic environment.
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