Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL AAA/Stable’ rating to the Rs.3,000 crore bonds of National Housing Bank (NHB) and reaffirmed its ratings on the existing debt instruments and bank facilities at 'CRISIL AAA/Stable/CRISIL A1+'.
CRISIL Ratings has withdrawn its rating of NCDs aggregating Rs.2000 crore on the company's request as the outstanding against the same is nil and on receipt of confirmation from debenture trustee (See Annexure 'Details of Rating Withdrawn' for details). The withdrawal is in line with CRISIL Ratings withdrawal policy.
The ratings continue to reflect the support receives from the Government of India (GoI) on account of the institution’s key policy role in India’s housing finance sector. The ratings also factor in robust asset quality and healthy capitalisation. These strengths are partially offset by an average earnings profile, given the institution’s developmental role in the housing finance sector. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has considered the standalone business and financial risk profiles of NHB, and has factored in support from GoI. This is given the 100% shareholding of by the Government of India, and the key policy and supervisory role it plays in the Indian Housing Finance Sector. |
Key Rating Drivers & Detailed Description Strengths:
NHB, a financial institution and 100% owned by government of India, carries out supervisory, refinancing, developmental role, and also play a key policy role in implementing government policy, for the housing industry. It provides long-term credit to licensed HFCs, scheduled banks, and other primary lending institutions. It is also one of the nodal agencies for the Credit Linked Subsidy Scheme (CLSS), under the GoI’s flagship programme for housing, Pradhan Mantri Awas Yojana (PMAY).
NHB reported gross non-performing assets (GNPAs) of 1.05% and nil net NPAs as on March 31, 2023, against 2.12% and nil respectively, for the corresponding period in the previous fiscal (2.91% and nil respectively, as on June 30, 2021). The reduction in NPAs over last two fiscals, is on account of recovery of Rs 1,730 crore approximately from one of the two NPA accounts in the refinance portfolio which were already provided for. NHB has obtained mandates from scheduled banks, regional rural banks, and urban cooperative banks for direct debit to their current accounts with the RBI if there is a delay or default in payment of refinance instalments. Additionally, it obtains a negative lien on their assets. Moreover, funds are primarily extended to HFCs with strong credit worthiness.
The capital to risk-weighted assets ratio (CRAR) was 16.12% as on March 31, 2023, against 15.90% as on March 31, 2022 (12.14% as on June 30, 2021). The increase in CRAR in on account of improvement in profitability due to write backs and, reduction in risk weighted assets (RWA) because of de-growth in the loan book in fiscal 2022. Further, the networth is healthy and net NPAs are nil, leading to high coverage for asset-side risks. Capitalisation is also supported by steady accrual, which is entirely retained in the absence of any dividend payout.
Weakness
The interest margin is low as lending has been at competitive rates, while borrowing has been increasingly at market rates. The net interest margin (NIM) was 2.0% for the nine-month period ended March 31,2023 compared with 1.3% for the corresponding period of previous fiscal. Profitability, after remaining subdued for fiscal 2020 and 2021 due to elevated credit cost, revived in fiscal 2022 driven by a one-time significant recovery from a non-performing account. Resultantly, the RoA improved to 2.3% and the bank reported a PAT of Rs 1920 crore for fiscal 2022. For the nine- month period ending March 31, 2023, the bank reported the RoA and PAT of 1.3% (annualized) and Rs 839 crore respectively. |
Liquidity: Superior The ALM profile showed cumulative positive mismatches in all buckets of up to one year, as on April 30, 2023. Liquidity is sufficient with Rs 4,350 crore cash and liquid investments (in the form of government securities and bank deposits), and unutilised bank lines of Rs 6,400 crore as on April 30, 2023, against debt obligation of Rs 8,392 crore till September 2023. |
Outlook: Stable CRISIL Ratings believes NHB will continue to receive strong funding and operational support from GoI because of its public policy and supervisory role in India's housing sector. The asset protection mechanism available to NHB should continue, and the institution will likely maintain comfortable capitalisation over the medium term. |
Rating Sensitivity Factors Downward Factors
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About the Bank NHB, the apex institution in the housing finance sector, extends refinance support to HFCs, scheduled banks, regional rural banks, small finance banks, state apex cooperative housing finance societies, and state cooperative agriculture and rural development banks. Additionally, it manages the Affordable Housing Fund (which includes the erstwhile Rural Housing Fund and Urban Housing Fund); commercial banks deposit the shortfall in their priority sector advances to the fund.
Moreover, it is supervisor to the HFC sector and plays a key policy role in supporting GOI’s flagship programme for the development of the housing sector. NHB also advises state governments in formulating state housing policies.
Established in 1988 under the National Housing Bank Act, 1987, NHB began operations with an initial capital of Rs 100 crore. The RBI has divested its entire stake in NHB to the government for Rs 1,450 crore. With this divestment, the government now holds 100% stake with effect from March 2019. In July 2019, the government has transferred the functions of NHB for regulating HFCs to the RBI. NHB, a financial institution, will continue to carry out supervisory and refinancing and will also play a key policy role in the housing industry. As on March 31, 2023, Outstanding loans were Rs 81,087 crore.
Profit after tax (PAT) was Rs 839 crore on total income (net of interest expense) of Rs 1,297 crore for the nine-month period ended March 31, 2023, as against a PAT of Rs 1,725 crore on total income (net of interest expense) of Rs 1,264 crore, in the corresponding period of the previous fiscal. |
Key Financial Indicators
*As per CRISIL Calculations |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Rs 6,000 crore under RHF and Rs 3,000 crore under UHF @Yet to be issued
Annexure - Details of Rating Withdrawn
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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Criteria Details
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