Reliance Capital gets nod to float NBFC, home finance firm
Reliance Capital has got the regulatory approval to set up a housing finance company (HFC) and a non-banking finance company (NBFC) and intends to kick off operations with focus on small ticket loans. The companies, which will be subsidiaries of Reliance Capital, are in the process of setting up teams and is looking to commence operations in a couple of months.
“The market is not conducive to large-scale business at the moment. We will start slowly, focussing on the small ticket loans, and once things start improving, we will build on it,” said Reliance Capital CEO Sam Ghosh. To start with, funding requirements of both the finance companies is expected to be met though Reliance Capital and based on the business volume, the company will look for other sources of funds.
“At the moment both the companies are well capitalised. If the business volume picks up, to maintain the capital adequacy ratio of 15 per cent, we will look at other options of external funding,” Ghosh told Business Standard. He also did not rule out the possibility of tapping the equity market in a few of years.
At present, the home finance is clubbed with the consumer finance business of Reliance Consumer Finance but the Anil Ambani group sought separate licences to avail of special benefits associated with being a housing finance company regulated by National Housing Bank. The biggest benefit is the facility to tap the refinance window which gives access to cheaper funds. In addition, HFCs can also repossess assets where installments are overdue, can do with a lower capital adequacy ratio and access to external commercial borrowings.
“The approval will help Reliance Capital grow the housing finance business in a more focused manner and achieve certain objectives. Our objective is to be one of the leading housing finance companies over the next three to five years,” the company said in a statement.