National Housing Bank keen to introduce covered bonds

KOLKATA: National Housing Bank (NHB) is keen to introduce covered bonds and promote other capital market solutions for the mortgage lending business in India. NHB has appointed Vinod Kothari as consultant to help it introduce covered bonds.

The decision follows the recent report of the working group on introduction of covered bonds in India.

NHB is expecting housing finance companies with strong balance sheets to raise funding through alternative capital market instruments such as covered bonds.

Covered bonds, with their traditional mainstay in Europe, are now being introduced into Asian markets as an alternative to complex mortgage backed securities.

It also appears that several hurdles facing mortgage securitisation transactions - such as stamp duty, taxation issues, etc., may also get cleared and mortgage lenders in India may soon opt for mortgage backed securities too.

Recently, housing finance companies have also been permitted to source external commercial borrowings. Since securitisation also counts as an ECB, housing finance companies may also get to issue ECBs to inter-national investors.