Housing finance company, LIC Housing Finance is planning to set up a separate arm for its home loan business in the North-East.
The operations of the company which will be in the nature of a special purpose vehicle (SPV) will be limited to the acquisition and financing of specific assets in the North-East.
A SPV is normally a bankruptcy-remote entity where its insolvency will have marginal or no impact on the parent company, or other group entities.
According to Mr. V.K. Sharma, Managing Director and Chief Executive Officer, LIC HF, "In the North-East, we have a typical problem. You cannot create mortgages because of local laws. So, there is a hindrance in giving loans. But people need loans for building houses. Hence, our Board has given permission to explore the setting up of a kind of SPV for the north-eastern areas of the country."
The LIC HF chief also observed that it is very important to create organizations and systems to ensure that those living in the North-Eastern part of the country Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura - are absorbed into the national mainstream.
Talking about banks luring existing home loan customers of rival lenders with lower interest rates, Mr. Sharma said, "This kind of situation we have gone through twice in the past. In 2003-04, lot of churning (migration) was triggered by a few banks. At that time also we had been fairly successful and stable. And our customers, more or less, remained with us."