ICICI Bank to keep home finance as standalone arm

ICICI Home Finance will continue to be a wholly-owned subsidiary of ICICI Bank, because the bank has dropped plans to sell its stake. Additionally, the housing finance company (HFC) is looking to expand into spaces that the parent bank has not penetrated. It will now provide home loans to customers with self-assessed income.

“ICICI Home Finance was always seen as an extension of the bank. But, now we are moving towards a separate subsidiary,” said Anup Bagchi, executive director, ICICI Bank, and added that its processes and credit policies were different from those of the bank.

The HFC’s loan book currently stands at ~100 billion and the company aims to triple it to ~300 billion in three–four years. The Prime Minister’s ‘housing for all’ scheme has created an immense opportunity in the affordable housing segment. This has prompted the bank to decide on retaining the HFC, said Bagchi.

While most banks and their housing finance arms tend to step on one another’s toes, ICICI Home Finance wants to target profiles that its parent bank seems to be overlooking.

Initially, the HFC had the same approach as the bank and, thus, focused more on salaried customers. But now it is eyeing self-assessed customers, the market for which lies mainly in semiurban and rural areas. The company plans to cash in on ICICI Bank’s large rural customer base to reach out to them.

“The skills required, ticket sizes, the markets and the ways of generating value out of the opportunity are all very different (in the case of lending to self-assessed income customers). So, we thought of housing these in the HFC and not in the bank and decided to restrategise our HFC,” said Bagchi.

While the risk is higher in this profile, so is the pricing. “Our NIM (net interest margin) would be higher because of the pricing. We also have an advantage — our cost of finance is low because of ICICI parentage,” said Bagchi.