The Reserve Bank of India (RBI) has recently taken a significant regulatory action by canceling the Certificate of Registration of Chennai-based Ind Bank Housing Ltd. This move has raised eyebrows in the financial sector, as Ind Bank Housing Ltd had major shareholders in the form of Indian Bank and HUDCO (Housing and Urban Development Corporation Ltd), who held a 51 percent and 25 percent stake in the housing finance company, respectively. Ind Bank Housing Ltd, established in 1991, has been facing financial challenges, as evidenced by its widening net loss and negative capital adequacy ratio.
Widening Losses in FY23
In a significant revelation, Ind Bank Housing Ltd reported a substantial increase in its net loss for the financial year 2023. The net loss for the year amounted to ₹55.78 lakh, a stark contrast to the ₹12.93 lakh loss in the previous fiscal year (FY22). This deterioration in financial performance has raised concerns about the company’s sustainability.
Accumulated Losses on Balance Sheet
The company’s financial troubles are further underscored by its balance sheet figures. The balance loss carried to the balance sheet stood at ₹135.70 crore in FY23, slightly higher than the ₹135.15 crore reported in FY22, as per the housing finance company’s annual report. These accumulated losses have contributed to a negative capital adequacy ratio, which is a critical measure of a financial institution’s ability to meet its obligations.
Discontinuation of New Loan Provision
As part of its response to the financial challenges, Ind Bank Housing Ltd has taken a significant step by discontinuing the provision of new loans. The company is currently not engaged in any new lending activities. Moreover, the credit period of existing loans has already expired. This strategic move is an attempt to mitigate further financial risk and focus on recovering existing loans.
The annual report of Ind Bank Housing Ltd states that the company is making conscious efforts to recover the loans it has previously extended. These efforts are pivotal in light of the company’s dire financial situation. Effective loan recovery can help stabilize the company’s financial position and potentially pave the way for future operations.
RBI’s Regulatory Action
In response to Ind Bank Housing Ltd’s financial woes, the Reserve Bank of India has issued a statement outlining its regulatory action. The RBI has directed that the company is not permitted to transact the business of a Housing Finance Institution or a Non-Banking Financial Institution as defined in the National Housing Bank Act, 1987, and the Reserve Bank of India Act, 1934, respectively. This regulatory action has far-reaching consequences for the company’s operations and future prospects.