Annual-Report-2013-14-English.Pdf

okf"kZd fjiksVZ 2013&14

jk"Vªh; vkokl cSad

01 ANNUAL REPORT 2013-14

Annual Report 2013-14 National Housing Bank

125 ANNUAL REPORT 2013-14

List of Items Pg. No.

Chapter I: 134 I.1 About National Housing Bank (NHB) 134 I.2 Governance Structure of The Bank 136 I.3 Board of Directors 138 Chapter II: Current Macro and Micro Economic Condition and 141 Status of Indian Economy II.1 Global Economy Outlook 141 II.2 Indian Economy 143 Chapter III: NHB Operations 147 III.1 NHB Highlights 2013-14 147 III.2 Resource Mobilization 156 III.2.a Main Avenues of Resource Raising 157 III.3 Deployment of Funds 159 III.3.a Refinance Disbursements 159 III.3.b Tenure-wise break-up of Bank’s Refinance Disbursements 162 during the year 2013-14 III.3.c Disbursements in respect of Housing Loans in Rural and 163 Urban Areas III.3. d Rural Housing Fund (RHF) 164 III.3. e Refinance for Energy Efficient Housing 165 III.3. f New Refinance Schemes Launched 165 III.4 Sanctions and Disbursements through Direct Finance 167 III.4 a. Project Finance and Technology Promotion 168 III.4.b. Housing Micro Finance Programme 168 III.4.c. Cumulative Performance (Excluding project refinance) 168 III.4.d UN-Habitat WATSAN program 169 III.4.e. External Commercial Borrowings for Affordable Housing 169 Projects. III.5 Regulation and Supervision 171 III.5.a. Registration/ Cancellation of Certificate of Registration 171 granted to HFCs III.5.b Supervision of HFCs 172 III.5.c. Grievance Registration and Information Database System 172 (GRIDS) III.5.d. Notifications, Circulars, and Caution Advices Issued 173 III.5.e. Co-ordination with Other Regulatory Authorities 177 III.5.f. Other activities 177

126 ANNUAL REPORT 2013-14

Pg. No.

III.6 Promotion and Development 178 III.6.a. Interest Subsidy Scheme for Housing the Urban Poor 178 (ISHUP) III.6.b. 1% Interest Subvention Scheme 179 III.6.c. Rajiv RinnYojana 179 III.6.d. NHB-RESIDEX-The Residential Property Price Index 180 III.6.e. Credit Risk Guarantee Fund Trust for Low Income Housing 183 (CRGFTLIH) III.6.f. Capital Subsidy Scheme for Installation of Solar Water 184 Heating and Solar Lighting Systems in Homes III.6.g. Golden Jubilee Rural Housing Finance Scheme (GJRHFS) 185 III.6.h RML and RMLA 187 III.6.i Residential Mortgage Backed Securitization 187 III.6.j Equity Participation 188 III.7 Information Technology 190 III.7.a. Major Activities and Projects 190 III.7.b. New Initiatives 191 III.7.c IT Committee 192 III.8 Human Resource 192 III.8.a Recruitment, Promotions and Retirement/Resignations 192 III.8.b. Training and Development 193 III.8.c. Schemes & Policies introduced/ revised during the year 193. III.9 Risk Management And Internal Controls 193 III.10 Rajbhasha 194 III.11 Knowledge Center 196 III.12 Corporate Communication 196 III.13 Capacity Building 197 III.14 Role of RO and RROs 199 III.15 Corporate Governance 199 Chapter IV : Future Outlook 201 IV.1 Looking Ahead Chapter V: Annual Accounts 206 Abbreviations 205

127 ANNUAL REPORT 2013-14

Tables Table 1 Financial Highlights Table 2 Profitability 2013-14 Table 3 Share Capital of NHB Table 4 Total borrowing outstanding of NHB during 2013-14 Table 5 Position of RHF mobilized year-wise Table 6 Position of UHF mobilized year-wise Table 7 Institution-wise break-up of NHB's Refinance disbursements in the year 2013-14 Table 8 The break-up of the disbursements made to different categories of institutions under different schemes during 2013-14 Table 9 Loan Size-wise Break-up of Disbursements during 2013-14 Table 10 Tenure-wise Break-up of Refinance Disbursements during 2013-14 Table 11 Disbursements in respect of Housing Loans in Rural and Urban Areas Table 12 Performance under Rural Housing Schemes Table 13 Rural Housing Fund (RHF) Table 14 Refinance under Energy Efficient Housing Scheme Table 15 Urban Housing Fund (UHF) Table 16 Cumulative refinance disbursements upto 2013-14 Table 17 Trend of Refinance Disbursements Table 18 Trend of NHB's Project Finance Disbursements Table 19 Progress made under ISHUP through NHB Table 20 Performance under 1% Interest Subvention Scheme Table 21 NHB RESIDEX - Price Movement for the quarter April-June, 2014 (26 Cities) Table 22 Details of guarantee issued under Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) Table 23 Performance under GJRHFS for the year 2013-14 Table 24 Cumulative performance under GJRHFS since inception Table 25 NHB's Training Calendar 2013-14

128 ANNUAL REPORT 2013-14

Graphs

Graph G.1 Changes in Real GDP at market prices Graph G.2 World Economic Outlook Projections Graph G.3 Borrowing Outstanding as on 30th June 2014 Graph G.4 Institution-wise break-up of NHB’s Refinance Disbursement during 2013-14 Graph G.5 NHB’s disbursements made to different categories of institutions under different schemes during 2013-14 Graph G.6 Loan size-wise break-up of Disbursements Graph G.7 Tenure-wise break-up of Bank’s Refinance Disbursements during 2013-14 Graph G.8 Break-up of annual Refinance Disbursements into Rural and Urban Areas Graph G.9 RHF Utilization amongst various PLIs Graph G.10 RHF Allocation vs Utilization Graph G.11 Trend of Refinance from 1999-2000 to 2013-14 Graph G.12 Cumulative performance under GJRHFS

129 ANNUAL REPORT 2013-14

Box Items

Box 1 Announcements related to Housing Sector in the Union Budget 2014-15 Box 2 Excerpts from the Economic Survey 2014-15 Box 3 Launch of the Report on the State of Low Income Housing Market in India by Monitor Delloite Group Box 4 Report on -"Scaling Up Housing Microfinance" by National Housing Bank in collaboration with IFMR Capital and DFID, UK.

130 ANNUAL REPORT 2013-14 Ekks- eqLrQ+k v/;{k ,oa izcU/k funs’kd Mohammad Mustafa Chairman & Managing Director

Letter of Transmittal

No. NHB (ND)/ CMD / 15474 /2014-15 October 31, 2014

The Secretary Government of India Ministry of Finance Department of Economic Affairs North Block, New Delhi- 110001

Dear Sir,

In accordance with the provision of sub-section (5) of Section 40 of the National Housing Bank (Amendment) Act, 2000, I forward herewith a copy of Annual Accounts of the National Housing Bank for the year 2013-14.The printed bilingual copies of the Annual Report will be submitted shortly.

Yours faithfully,

(Mohammad Mustafa) Encl.: As above

Hkkjrh; fjtoZ cSad dksj 5&, bafM;k gSfcVsV lsaVj] yks/kh jksM+] ubZ fnYyh&110003 ds laiw.kZ LokfeRo esa nwjHkk"k ¼lh½ 011&2464 2722 ¼ihch,Dl½ 011&2464 9031&35 QSDl % 011&2464 9030 rkj % fuokl cSad bZ&esy % [email protected] Wholly owned by 5th Floor, Core 5-A, India Habitat Centre, Lodhi Road, New Delhi-110003 Reserve Bank of India Phone: (D) 011-2464 2722 (PBX) 011-2464 9031-35 Fax : 011-2464 9030 Gram : NIWAS Bank email : [email protected] ÞcSad fgUnh esa i=kpkj dk Lokxr djrk gSß

131 ANNUAL REPORT 2013-14 Ekks- eqLrQ+k v/;{k ,oa izcU/k funs’kd Mohammad Mustafa Chairman & Managing Director

Letter of Transmittal

No. NHB (ND)/ CMD / 15473 /2014-15 October 31, 2014

The Secretary Government of India Ministry of Finance Department of Financial Services Jeevan Deep Building, Parliament Street New Delhi- 110001

Dear Sir,

Yours faithfully,

(Mohammad Mustafa) Encl.: As above

132 ANNUAL REPORT 2013-14 Ekks- eqLrQ+k v/;{k ,oa izcU/k funs’kd Mohammad Mustafa Chairman & Managing Director

Letter of Transmittal

No. NHB (ND)/ CMD / 15475 /2014-15 October 31, 2014

The Governor Reserve Bank of India Central Office Building 18th Floor, Shahid Bhagat Singh Road Mumbai-400023

Dear Sir,

Yours faithfully,

(Mohammad Mustafa) Encl.: As above

133 ANNUAL REPORT 2013-14

Chapter I

I.1 ABOUT NATIONAL HOUSING BANK (NHB)

NHB was established under an Act of Parliament viz, NHB Act in 1988 to operate as a principal agency to promote housing finance institutions and to provide financial and other support to such institutions. NHB is wholly owned by the Reserve Bank of India. NHB is committed towards the establishment of a sound and stable housing finance system in the country by way of promoting financial and institutional depth in the housing sector. NHB has continuously worked towards the development and promotion of innovative market-based solutions for low income housing segments. It’s focused approach towards the development of institutional and market infrastructure has led to the expansion and stabilization of the housing sector. Apart from its various promotional activities, NHB is continuously engaged in imparting various confidence building measures amongst all the stake holders from time to time.

Vision

“Promoting Inclusive Expansion with Stability in the Housing Finance Market.”

Mission

“To harness and promote the market potentials to serve the housing needs of all segments of the population with focus on low and moderate income housing.”

Objectives

The Bank is a multifunctional Development Finance Institution (DFI) and performs a range of activities including financing, regulation and supervision and promotional initiatives. NHB regulates and supervises the activities of housing finance companies in accordance with the provisions of the NHB Act. This includes registration of housing finance companies for conduct of housing finance business, on-site and off-site supervision of housing finance companies, consumer interface and protection & co-ordination with other regulators. NHB, through its Since its inception, NHB has multifunctional, mutually synergistic and complementary roles has been working to facilitate the broadened the scope and reach of the housing finance system, supply of affordable housing for the “bottom of the pyramid” integrating it with the broader financial sector and capital market. (BoP) Since its inception, NHB has been working to facilitate the supply of affordable housing for the “bottom of the pyramid” (BoP) and to encourage broad-based home ownership through a right mix of policy initiatives. The housing finance system has evolved and steadily grown through various stages with NHB at the centre-stage. NHB through its

134 ANNUAL REPORT 2013-14 multi-functional role is engaged in building the market infrastructure for the sector’s efficient functioning. NHB is strongly committed towards creating an appropriate environment for affordable housing and housing finance that can cater to all segments of the population. At the same time, NHB continually seeks to contribute towards the development of sustainable habitat and towards the promotion and preservation of environment through energy efficiency and similar initiatives. In this regard, NHB continues to seek partnership with domestic and international agencies towards the promotion and implementation of such initiatives in the country. Through its various promotional and financing initiatives, NHB is pursuing its vision of “Promoting Inclusive Expansion with Stability in the Housing Finance Market” and its mission is “To Harness and promote the market potentials to serve the housing needs of all segments of the population with focus on low and moderate income housing”. NHB has sought to actualize its vision through its focus on four broad areas of activities viz. 1. Financing 2. Development of Market Infrastructure 3. Expanding the Scope of low and moderate income housing, and 4. Supervision of Housing Finance Companies and the housing finance

As a matter of conscious policy, Bank has judiciously combined its various roles viz. financing, regulation and promotion for optimum impact on the expansion and stability of the mortgage market. Bank’s programmes of financial assistance have focused on inclusive growth through market-based solutions and approach. In formulation and delivery of such solutions, Bank’s initiatives and policies have led the market towards greater efficiency and competition and wider choice of products for people in all income segments.

In the backdrop of huge housing shortage among lower income segments, NHB has adopted a multi-pronged approach to tackle this problem. These include institution-building initiatives and measures for creating conducive environment for innovative practices in sync with market oriented approach.

Key aspects of NHB’s business model for reaching lower income segments are: 1. As a backstop institution, NHB provides concessional loan assistance to mortgage lenders for better home ownership among lower income households. 2. Initiatives on risk mitigation through mortgage credit guarantee institutions and funds, which improve affordability for the borrowers as also encourage the lenders to increase their exposure to these segments.

135 ANNUAL REPORT 2013-14

3. Capacity building through training programmes, standard as well as customized, for mortgage lending personnel at different levels. 4. Information dissemination aimed at better market functioning and transparency, advocacy and co-ordination roles are a critical function of the Bank

The initiatives and measures of NHB have resulted in a quantum growth in the mortgage industry. Regulation has added stability; financing has provided support to retail lenders for better growth and viability, capacity building has improved skill-sets in the industry. There is improved flow of credit to underserved segments, bringing about positive change in their quality of life.

Besides raising resources in the domestic market, NHB has also tapped the international market for long term resources through bi-lateral/ multi-lateral arrangements. These lendings are mainly program oriented and include medium income housing, Energy Efficient (EE) residential housing, low income housing, informal sector lendings etc. The Bank’s ongoing dialogues and engagements with external institutions under various Government-to-Government programs have led to long term international funding from various sources to support and help the larger sectoral and social cause.

The Bank is served by a committed management and employee base of 108 officers with diversified skills and backgrounds. The Bank has a unitary cadre of officers and continues to be a lean organization with extensive IT-enablement across its various functions and activities. Its officers serve across 13 centers in the country and have diverse backgrounds ranging from finance and accounts, law, economics, engineering, management, architecture and planning etc.

I.2 GOVERNANCE STRUCTURE OF THE BANK

Composition of the Board and its Committees

The general superintendence, direction and management of the affairs of the business of the Bank are vested in the Board of Directors, which acts on business principles with due regard to public interest. The Board of Directors has been constituted in accordance with the provisions of the National Housing Bank Act, 1987 (Central Act No. 53 of 1987). The Board is headed by the Chairman and Managing Director, who are appointed under Section 6 (1) (a) of the Act. As on 30th June, 2014, apart from Chairman and Managing Director, there were eight other directors on the Board including eminent professionals representing the fields of Architecture, Economics and Finance, with its composition as under: § two Independent Directors, appointed by the Central Government under Section 6 (1) (b) of the Act,

136 ANNUAL REPORT 2013-14

§ two Directors from out of the directors of Reserve Bank, nominated by Reserve Bank of India under Section 6 (1) (d) of the Act, § three Directors from amongst the officials of the Central Government, appointed by the Central Government under Section 6 (1) (e) of the Act, § one Director from amongst the officials of the State Government, appointed by the Central Government under Section 6 (1) (f) of the Act,

The Board has constituted three Committees, viz., (a) Executive Committee of Directors [EC], (b) Audit Committee of the Board [ACB] and (c) Remuneration Committee of Directors [RC] to enable better and focused attention on the affairs of the Bank. The functions of the EC, ACB and RC are well-defined and the Board has delegated certain powers to these Committees. The Board/Committee meetings are held at regular intervals.

During the year 2013-14, the Board met four times, the Executive Committee met five times, Audit Committee of the Board met five times and the Remuneration Committee of directors met once.

The following changes took place in the composition of the Board of Directors of the Bank during the year 2013-14: i. Shri Mohammad Mustafa, IAS, Joint Secretary to the Govt. of India, Department of Financial Services, Ministry of Finance was appointed as Chairman and Managing Director, National Housing Bank with effect from May 13, 2014. ii. Shri Sanjeev Kumar, IAS, Joint Secretary (RAY) to the Govt. of India and Mission Director (JNNURM), Ministry of Housing and Urban Poverty Alleviation was appointed as Director with effect from September 25, 2013. iii. Shri Karoon Dey, Secretary to Government of West Bengal, Housing Department was appointed as Director with effect from May 05, 2014 in place of Shri Ajay Kumar Dutta; iv. Shri Alok Tandon, IAS, Joint Secretary to the Govt. of India, Department of Financial Services, Ministry of Finance was appointed as Director with effect from June 09, 2014 in place of Shri Arvind Kumar. v. Dr. S. Siddharth, IAS, Secretary to the Government of Bihar, Urban Development and Housing Department ceased to be a Director with effect from June 06, 2014;

137 ANNUAL REPORT 2013-14

I.3 BOARD OF DIRECTORS (as on June, 2014)

Shri Mohammad Mustafa, IAS Chairman & Managing Director

Dr. Santosh Chandra Panda Professor of Economics, Delhi School of Economics (under Section 6(1) (b) of the National Housing Bank Act, 1987)

Dr. Neelima Risbud Dean of Studies, School of Planning and Architecture (under Section 6(1) (b) of the National Housing Bank Act, 1987)

Shri H. R. Khan Deputy Governor, Reserve Bank of India (under Section 6(1) (d) of the National Housing Bank Act, 1987)

Shri G. M. Rao Director, Central Board of Directors, Reserve Bank of India (under Section 6(1) (d) of the National Housing Bank Act, 1987)

Shri Alok Tandon, IAS Joint Secretary to the Government of India, Ministry of Finance (under Section 6(1) (e) of the National Housing Bank Act, 1987)

Smt. Vijaya Srivastava, IAS, Joint Secretary to the Government of India, Ministry of Rural Development (under Section 6(1) (e) of the National Housing Bank Act, 1987))

Shri Sanjeev Kumar, IAS Joint Secretary (RAY) to the Government of India & Mission Director (JNNURM), Ministry of Housing and Urban Poverty Alleviation (under Section 6(1) (e) of the National Housing Bank Act, 1987)

Shri Karoon Dey Secretary to the Govt. of West Bengal, Housing Department (under Section 6(1) (f) of the National Housing Bank Act, 1987)

138 ANNUAL REPORT 2013-14

Executive Committee of Directors

Shri Mohammad Mustafa, Chairman Shri H.R. Khan, Member Shri G.M. Rao, Member Dr. Santosh Chandra Panda , Member

Audit Committee of the Board

Shri H.R. Khan, Chairman Shri G.M. Rao, Member Dr. Santosh Chandra Panda, Member Dr. Neelima Risbud, Member

Remuneration Committee of the Board

Shri H.R. Khan, Chairman Shri G.M. Rao, Member Dr. Santosh Chandra Panda, Member Dr. Neelima Risbud, Member

139 ANNUAL REPORT 2013-14

BOARD OF DIRECTORS (as on June 30, 2014)

Shri Mohammad Mustafa, IAS Chairman & Managing Director

Dr. Santosh Chandra Panda Dr. Neelima Risbud

Shri H.R. Khan Shri G.M. Rao

Shri Alok Tandon, IAS Smt. Vijaya Srivastava, IAS

Shri Sanjeev Kumar, IAS Shri Karoon Dey

140 ANNUAL REPORT 2013-14

Chapter II:

CURRENT MACRO AND MICRO ECONOMIC CONDITION AND STATUS OF INDIAN ECONOMY

II.1 GLOBAL ECONOMY OUTLOOK

Global activity has broadly strengthened and is expected to improve further in 2014–15, with much of the impetus coming from advanced economies. Inflation in these economies, however, has undershot projections, reflecting still-large output gaps and recent commodity price declines.

As mentioned in the IMF's report on World Economic Outlook-April 2014, global growth picked up in the second half of 2013, averaging 3 2/3 percent, up from 22/3 percent recorded during the previous six months. Advanced economies accounted for much of the pick-up, whereas growth in emerging markets increased only modestly (G.2) 1. The strengthening in activity was mirrored in global trade and industrial production. The latest data suggest a slight moderation in global growth in the first half of 2014. The stronger-than-expected acceleration in global activity in the latter part of 2013 was partly driven by increases in inventory accumulation that will be reversed.

In emerging market and developing economies, growth picked-up slightly in the second half of 2013 due to increase in exports , lifted by Graph G.1 stronger activity in advanced economies. But the investment weakness continued, and external funding and domestic financial conditions increasingly tightened. Supply-side and other structural constraints on investment and potential output (for example, infrastructure bottlenecks) are issues in some economies. These offsetting forces are expected to remain in effect through much of 2014. Overall, however, emerging market and developing economies continue to contribute more than two-thirds of global growth, and their growth is projected to increase from 4.7 percent in 2013 to 4.9 percent in 2014 and 5.3 percent in 2015.

While the financial environment for emerging markets has been challenging, financial conditions across Asia have remained broadly conducive. Domestic credit growth and corporate bond issuances have been strong indeed, corporate leverage for the region as a whole has risen, as companies tried to take advantage of the still favorable global liquidity conditions. Activity across Asia picked up in the second half of 2013. GDP growth improved across most of the region during the past year, 1. World Economic Outlook April, 2014 and recent high-frequency indicators, while somewhat 2. IMF Regional Outlook (Asia), April, 2014 mixed, point to a solid expansion continuing into 2014 (G.1) 2.

141 ANNUAL REPORT 2013-14

G.2 World Economic Outlook Projections

– –

– – – – – – –

– – – – –

– – – – – – – –

– – – – – –

– – – –

–

– –

– – – – – – – – – – –– –

– – – –

– –

142 ANNUAL REPORT 2013-14

II.2 INDIAN ECONOMY

The Indian economy weathered the global financial crisis rather well and quickly recovered from the decline in growth rate in 2008-09 to a healthy growth that averaged around 9 percent annually in 2009-10 and 2010-11. However, Indian economy went through challenging times being part of the global economy with its exports and imports amounting to 43 percent of GDP and two-way external sector transactions amounting to 108 percent of GDP. The GDP went down to 4.5% in 2012-13 and 4.7% in 2013-14 and could be attributed to domestic The Indian economy stands at and external factors such as cyclical down turn with global crossroads which can be taken contractionary headwinds, elevated current account deficit, macro- from a slow road to a faster one economic imbalance persistent inflation, and the need for a sustainable through greater political stability policy. The economy in 2013-14 has faced rather turbulent times and a supportive policy emanating from exchange rate pressures amid capital outflows, framework persistence of near double digit inflation, fiscal imbalances and a decline in investment.

In 2013-14, the agriculture sector's rebound to an above trend growth rate on the back of a normal monsoon, supported overall growth. The industrial sector contracted, while services sector growth remained unchanged at the previous year's level. Structural impediments, high inflation and domestic policy uncertainties continued to weigh down growth prospects.A series of financial turbulence across the globe coupled with rising crude prices caused capital outflows and exerted pressure on the exchange rates, with the Indian economy more or less typifying the 'fragile' EME basket for the first half of FY 2013-14. It was observed that a low overall growth reflected contracting fixed investment and slowing consumption, though there was an improvement in export growth aided by rupee depreciation and contraction in imports due to subdued demand conditions and policies to dissuade gold imports.

Inflation in terms of consumer price index (CPI) eased during the period December 2013 to February 2014, declining to 8.0 percent after remaining above 9 percent for 22 successive months and touching a high of 11.2 percent in November 2013. The moderation in consumer price inflation resulted from a sharp correction in food prices. However, the disinflationary momentum has not gathered strength as decline in food prices was temporary and second round effects from high food inflation continue to exert pressures on the general price level. CPI excluding food and fuel inflation showed considerable persistence at an elevated level during H1 of 2013-14, followed by a fall from 8.5 percent in September 2013 to 7.8 percent in March 2014 and further to 7.4 percent in July 2014 . This decline in a component that has exhibited stickiness was supported by a tight monetary policy stance. Going forward, while growth revival on a sustainable basis will remain an objective, inflation risks will need to be factored in.

143 ANNUAL REPORT 2013-14

The Indian economy stands at crossroads which can be taken from a slow road to a faster one through greater political stability and a supportive policy framework. The strong policy measures taken by the Government and the RBI has somewhat stabilized the currency, rebuilt the reserves, and narrowed the excessive current account deficit but the weaknesses in the form of persistent inflation, fiscal imbalances, bottlenecks to investment, and inefficiencies that require structural reform still persist. The economy is poised to make a shift to a higher growth trajectory in 2014-15 that could take the growth to around 5.5 percent. The Central Bank of the country i.e. Reserve Bank of India and the Government will need to exercise caution during 2014-15 so that the gains in macro-stability are preserved and the disinflationary momentum gathers traction. Further, for the situation to improve micro-economic policies covering reforms in the areas of industry, services, international trade, labour markets, public sector management, financial markets and competition are needed to work towards improving activity levels and productivity, thus shaping improved supply responses that can help enhance the growth potential. This approach can help in hoping for a sustainable growth of atleast 7 percent in a non-inflationary manner once global growth normalise.

Box 1 Announcements related to Housing Sector in the Union Budget 2014-15

§ Allocation for National Housing Bank increased to` 8000 crore to support Rural housing. § A sum of` 4000 crore for NHB from the priority sector lending shortfall with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment is provided. § Extended additional tax incentive on home loans shall be provided to encourage people, especially the young, to own houses. § Mission on Low Cost Affordable Housing anchored in the National Housing Bank to be set up. § Slum development to be included in the list of Corporate Social Responsibility (CSR) activities to encourage the private sector to contribute more. § Master planning of 3 new smart cities in the Chennai-Bengaluru Industrial Corridor region, viz., Ponneri in Tamil Nadu, Krishnapatnam in Andhra Pradesh and Tumkur in Karnataka to be completed. Development of industrial corridors with emphasis on Smart Cities linked to transport connectivity to spur growth in manufacturing and urbanization will be accelerated. § A sum of` 7060 crore is provided in the current fiscal for the project of developing “one hundred Smart Cities' § Incentives for Real Estate Investment Trusts (REITS). Complete pass through for the purpose of taxation and a modified REITS type structure for infrastructure projects as the Infrastructure Investment Trusts (INVITS). These two instruments are prepared to attract long term finance from foreign and domestic sources including the NRIs.

144 ANNUAL REPORT 2013-14

The financial sector especially the Public Sector Banks need to review their governance structure and market discipline to contain the level of NPAs as percentage of Gross Advances. As per RBI's Financial Stability Report (FSR), June 2014, India's financial system remains stable, though the banking sector is facing some major challenges, mainly relating to public sector banks (PSBs). The year 2014-15 seems promising. Improved global growth momentum in 2014 and the recent weakening of the rupee should spur exports. Export growth is also expected to pick-up as the advanced economies consolidate their growth momentum.

Indian Economy: Prospects for FY 2014-15

As per the Economic Survey 2014-15, the Indian economy is poised to overcome the sub-5 percent growth of gross domestic product (GDP) witnessed over the last two years. The growth slowdown in the last two years was broad-based, affecting in particular the industry sector. Inflation too declined during this period, but continued to be above the comfort zone, owing primarily to the elevated level of food inflation. Yet, the developments on the macro-stabilization front, particularly the dramatic improvement in the external economic situation with the current account deficit (CAD) declining to manageable levels after two The Indian economy is poised to overcome the sub-5 percent years of worryingly high levels was the redeeming feature of 2013-14. The growth of gross domestic fiscal deficit of the Centre as a proportion of GDP also declined for the product (GDP) witnessed over second year in a row as per the announced medium term policy stance. the last two years. Reflecting the above and much expectations of a change for the better, financial markets have surged. Moderation in inflation would help ease the monetary policy stance and revive the confidence of investors, and with the global economy expected to recover moderately, particularly on account of performance in some advanced economies, the economy can look forward to better growth prospects in 2014-15 and beyond.

The Financial Year 2014-15 has begun on a promising note with IIP growth beginning to look up. Further, inflation on an average seems to have than the corresponding period of the previous year. The Monetary policy is providing a more stable environment in terms of interest rates, liquidity and credit conditions, with tangible efforts to improve resource flow to productive sectors. The latter includes cuts in statutory liquidity ratio (SLR) and exemptions from regulatory pre-emptions such as cash reserve ratio (CRR), SLR and priority sector lending (PSL) for issuing long-term bonds to finance loans to infrastructure and affordable housing. Export growth has improved, while capital inflows remain adequate. Further, there has been a healthy accretion to foreign exchange reserves that helps insulate the economy against prospective shocks that may be transmitted onshore. The spike in global oil price following the civil war in Iraq was transitory and the oil prices seem to be stable. Overall, the exchange rate has been stable so far in 2014-15.

3. RBI's Financial Stability Report (FSR) June, 2014 4. The Economic Survey 2013–14 by Ministry of Finance, Government of India

145 ANNUAL REPORT 2013-14

Box 2 Excerpts from the Economic Survey 2014-15

Fiscal Deficit * India needs sharp fiscal correction * Need for subsidy reforms for fiscal consolidation * Recommends raising tax-to-GDP ratio for fiscal consolidation * Shortfall in revenues can be contained through better mobilisation and reforms * External debt remains within manageable limits

Growth * GDP growth seen at 5.4-5.9 percent in 2014/15 * Economic growth of 7-8 percent not seen before 2016/17 * Downward risk to economic growth due to poor monsoon, external factors

Inflation * Government needs to move towards low and stable inflation through fiscal consolidation * Wholesale Price Index (WPI)inflation expected to moderate by end-2014 * Consumer Price Index (CPI) inflation showing signs of moderation * Needs to create a competitive national market for food

Balance of Payments * Improvement in balance of payments position during late 2013-14 was swift, thanks to import restrictions and economic slowdown * Need to adjust to advanced economies' event exit from accommodative monetary policy stance

Subsidies * Rationalization of subsidies such as fertilizer and food essential * Need to shift subsidy programme from price subsidies to income support

Taxation * Government needs to move towards simple tax regime, fewer tax exemptions, single rate of goods and services tax (GST) * GST to play vital role in indirect tax reform

Forex Market * Intervention in forex market by Reserve Bank of India is behind accumulation of reserves generally

146 ANNUAL REPORT 2013-14

Chapter III NHB OPERATIONS III.1 NHB HIGHLIGHTS 2013-14 § Refinance disbursements touched the highest ever figure of ` 17856.18 crore during the year 2013-14, registering an increase of 1.79% over the disbursements of` 17541.64 crore made in Refinance disbursements 2012-13. touched the highest ever § ` figure of ` 17856.18 crore Giving greater emphasis on rural housing, 7689.97 crore were disbursed for rural housing under the Bank's two rural housing refinance schemes viz. Rural Housing Fund (RHF) and Golden Jubilee Rural Housing Finance Scheme (GJRHFS), together constituting 43% of the total disbursements. § Certificate of Registration (CoR) was given to 3 HFCs during the year 2013-14. The CoR was cancelled for one HFC due to non- compliance with the provisions of the National Housing Bank Act, 1987. Thus, as on 30th June 2014, the number of HFCs registered with NHB stood at 59. § Under Golden Jubilee Rural Housing Finance Scheme, the total achievement by the PLIs were 3,83,971 units against a target of 4,50,000 units. The total achievement since inception stood at 42,98,863 units i.e. an achievement of 96.60% against the allocated targets.

Table 1: Financial Highlights (` in crore)

Year ended 30 th June 2009 2010 2011 2012 2013 2014

Capital 450 450 450 450 450 450

Reserves 1,792 2,072 2,352 2,739 3,190 3,631

Disbursements 10,889 8,160 12,035 14,454 17,635 17,890

Loans & Advances 16,851 19,837 22,581 28,519 34,603 39,932

Total Assets 19,927 22,732 25,781 31,332 38,721 45,050

Gross NPAs Nil Nil Nil 4 184 184

Net NPAs Nil Nil Nil 3 156 111

Profit After Tax 236 280 279 387 450 487

CRAR (%) 18 20 21 20 17 15

No. of Employees 89 89 87 95 91 107

PAT per Employee 2.62 3.15 3.21 4.07 4.84 4.55

147 ANNUAL REPORT 2013-14

Table 2: Profitability (` in crore)

Year ended 30th June 2011 2012 2013 2014 1. Total Income 1948 2488 3024 3,518

2. Operating Expenses 1518 1889 2262 2,620

3. Operating Profit (1-2) 430 600 762 899 4. Provisions & 31 56 98 113 Contingencies 5. Profit Before Tax (3-4) 399 544 664 785 6. Provision for Tax 120 157 214 299 7. Profit After Tax (5 -6) 279 387 450 487

§ Two More Regional Representative Offices (RRO's) were opened at Bhubaneswar and Nagpur taking the count of total RRO's to eleven.

Opening of RROs at Bhubaneswar (left) and Nagpur (right)

§ NHB organized 25 training programmes during 2013-14 for the officers of HFCs, Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs) and Urban Co-operative Banks (UCBs), which is the highest in any year since its inception in 1988. Around 797 participants from various Primary Lending Institutions (PLIs) participated in Bank's programmes. NHB appointed nodal agency for RRY § NHB convened the 36th and 37th Meeting with the Chief Executive Officers (CEOs) of HFCs and Senior Officials of PSBs and select RRBs on Dec 13, 2013 and June 28, 2014 respectively. § NHB has been appointed as the nodal agency under the Rajiv RinnYojana (RRY).

148 ANNUAL REPORT 2013-14

§ NHB has been designated as a nodal agency for administering and monitoring the Capital Subsidy scheme under Jawaharlal Nehru National Solar Mission (JNNSM). § Two new RML Counseling Centers were opened at Nagpur and Bhubaneswar on June 19, 2014 and June 25, 2014 respectively. NHB now has 15 RML Counseling centers across 14 cities in the country. § NHB organized 25 training NHB and Department For International Development, DFID of programmes during 2013-14 UK have entered into an agreement for DFID's assistance to which is the highest in any year NHB to the tune of £50 million for promoting affordable since its inception housing in eight Low Income States (LIS) as per the terms & conditions mentioned therein which include income, loan size

NHB Annual Lecture Series

as important parameters. § Inaugural Lecture of the NHB's Annual Lecture Series was held on July 16, 2013. The series has been started to commemorate Bank's 25 years of existence. The first Lecture of the Series was delivered by Dr. Marja Hoek-Smit, Director of the International Housing programme of the Wharton School Zell/Lurie Real Estate Center on the topic “Inclusive Housing and Housing Finance: Key Lessons and Challenges” . § NHB in partnership with World Bank through Government of India, initiated a program to encourage the flow of funds to the urban poor for their housing requirements. Under the program, NHB will be receiving loan of $100 million (approx.) over a period of five years from World Bank which will be used to refinance the retail loans extended by the Primary Lending Institutions (PLIs) which conform to the criteria laid down under the program.

149 ANNUAL REPORT 2013-14

Felicitation of winners during the 6th Edition of the “Habitainment Quiz 2013”

§ As a part of the World Habitat Day celebrations in 2013, NHB in collaboration with the India Habitat Centre (IHC) organized the 6th Edition of the “Habitainment Quiz 2013” for the institutional and individual members of the India Habitat Centre. The theme of the quiz was 'Urban Mobility". § This year also, on the occasion of the World Habitat Day, NHB came out with its annual publication under the name: “Housing & Habitat : Select Essays” which was released by the Hon'ble Minister of Housing & Urban Poverty Alleviation, Dr.(Kum.) Girija Vyas . The Booklet is a compilation of the prize winning essays of the World Habitat Day 2012 Essay Competition. § NHB entered into Memorandum of Understanding (MoU) with Indian Green Building Council (IGBC) with respect to promoting Energy Efficient Homes, sharing of information, capacity building, networking in events and meetings and establishing Synergy between “NHB Energy Efficient Homes & IGBC Green Homes”. The MoU was signed by Dr. P.C. Jain, Chairman, IGBC and Shri Arnab Roy, ED, NHB in the presence of Shri A.K. Misra, Secretary, MoHUPA, during a conference on Green Apartments conducted by IGBC in New Delhi on July 12, 2013. § The Monitor Deloitte Group with support from the National Housing Bank launched a Report on the State of Low Income Housing Market in India on July 31, 2013 § In an endeavor to upscale and induce wider participation of developers and users for energy efficient housing, Association for Development and Research of Sustainable Habitats [ADARSH, a joint initiative of Ministry of New and Renewable Energy and The

150 ANNUAL REPORT 2013-14

Energy and Resources Institute (TERI)]and NHB signed a memorandum of understanding on August 21, 2013 at New Delhi. The Memorandum was signed by Dr. R.K. Pachauri, Director General-TERI & President ADARSH and Shri R.V. Verma, CMD, NHB. The website for the program on Energy Efficient Homes was also launched during the event by Shri A.K. Mishra, Secretary to the Government of India, Ministry of Housing and Urban Poverty Alleviation (MoHUPA), Government of India. § The 1st Annual Conference on Energy Efficient Homes under the Promotional Programme for New Energy Efficient Residential

The 1st Annual Conference on Energy Efficient Homes under the Promotional Programme for New Energy Efficient Residential Housing (EERH) was convened 1st Annual Conference on Energy Efficient Homes under the Promotional Programme for New Energy Efficient Residential Housing (EERH)

Housing (EERH), was held on November 25-26, 2013 at New Delhi. The primary objective of the Conference was to take forward the Programme of Energy Efficient Residential housing which is being implemented in India by way of a partnership between NHB and KfW Development Bank of Germany. § To sensitize the registered Housing Finance Companies about the importance and development in the area of Prevention of Money Laundering Act, 2002 (PMLA) and to review their compliance of Know your customer Guidelines/ Anti Money laundering norms, National Housing Bank organized interface with FIU-IND for the Principal Officers of Registered Housing Finance Companies-based at north, north-east and eastern regions on January 7, 2014. § NHB together with Micro Finance Institutions Networks (MFIN) has organized a half-day Roundtable Meeting on February 21,

151 ANNUAL REPORT 2013-14

Listing event of NHB Tax Free Bonds

2014 at NHB to deliberate on the Report of the “Committee on IMGC did the successful Comprehensive Financial Services for Small Business and Low closure of its first Mortgage Guarantee Contract in the Income Households”. Dr. Nachiket Mor, Director, Central Board Indian mortgage market of Reserve Bank of India, led the discussions. Shri Arun Maira, Member, Planning Commission, Government of India, joined the discussion as a special invitee. • The Bank mobilized` 900 crore through private placement during August 2013 and further mobilized` 3,100 crore during the period January 2014 to March 2014 through two public issues for` 2,100 crore and` 1,000 crore in Jan-14 and Mar-14 respectively. The private placement/first public issue was vide CBDT notification dated 8th August, 2013 and the second issue of` 1,000 crore was vide CBDT notification dated 13th February 2014. Subscription was received from all categories of investors including retail. Post closure, Bonds were allotted to the applicants. The Bonds were listed on the National Stock Exchange of India Ltd on January 16, 2014 in a ceremony held at the NHB Office in New Delhi. Trading in the Bonds started immediately after the launch. § On March 31, 2014, IMGC, the first Mortgage Guarantee Company set up to offer mortgage guarantee to lenders against borrower credit default on housing loans. The transaction offers a first loss guarantee on a pool of priority sector housing loans of Dewan Housing Finance Limited ('DHFL'). In a first of its kind of transaction, DHFL has securitized this pool of priority sector housing loans with a Mortgage Guarantee to a Trust and the Pass- Through Certificates issued by the Trust have been subscribed to by ICICI Bank Ltd. The pool has been provisionally rated “AAA (SO)” by CARE Ltd. § The report on the study on "Scaling up of Housing Micro finance in India" with the objective of evaluating NHB's housing micro

152 ANNUAL REPORT 2013-14

Release of the booklet “Programme, Achievements and Way Forward of EE Homes” at the Conclave on Mainstreaming Energy Efficient Housing Finance at Chennai

finance programme and studying the savings pattern of select informal sector households was released on March 13, 2014 by the hands of Dr Nachiket Mor, Member of the Central Board of Members, Reserve Bank of India. § NHB in collaboration with KfW Development Bank, Germany hosted a half day conclave on Mainstreaming Energy Efficient Housing Finance on March 19, 2014 at Chennai under the Programme of Energy Efficient Residential housing. The conclave saw the release of the booklet “Programme, Achievements and Way Forward of EE Homes” by NHB at the hands of Dr. Sadakkadulla, Regional Director for Tamil Nadu & Puducherry, Reserve Bank of India and felicitation of the PLIs and developers who have actively participated in the NHB- KfW's Promotional Programme on Energy Efficient residential Housing. § NHB together with Center for Environmental Planning and Technology (CEPT), University organized a half-day Roundtable Meeting in New Delhi on April 15, 2014 to deliberate on the subject “Financing Urban Sanitation and creation of Development Impact Fund”. § NHB along with KfW organized a Focused Group Discussion (FGD) in Mumbai on April 21, 2014 to create awareness among the PLIs about the NHB's EEHRS programme and to overcome various market barriers faced by the PLIs. § A workshop on Loan-cum-Capital Subsidy Scheme for installation of Solar Water Heating and Solar Lighting

153 ANNUAL REPORT 2013-14

Equipments in homes was held on May 1, 2014 under the Chairpersonship of Shri Tarun Kapoor, JS, Ministry of New and Renewable Energy (MNRE) at New Delhi. The purpose for organizing the sensitization programme was to create awareness NHB was honored with the about the captioned Scheme among various stakeholders viz. ADFIAP “Outstanding Scheduled Commercial Banks (SCBs), Regional Rural Banks Development Project Awards” (RRBs) and Housing Finance Companies (HFCs). and SKOCH Financial Inclusion & Deepening Award § A workshop for senior citizens on Retirement Communities & during 2013-14 Reverse Mortgage Loan was conducted by "Old is Gold Store" on May 08, 2014 at Chennai to discuss on these topics and create awareness. The workshop was attended by 130 senior citizens. § NHB was honored with the Association of Development Financing Institutions of Asia and the Pacific (ADFIAP) “Outstanding Development Project Awards” for its initiatives in “Rural Housing Finance” during the 37th ADFIAP Annual Meetings held in Moscow, Russia on April 23-25, 2014.The award was received by Mr. R.S.Garg, ED, NHB. § National Housing Bank was conferred the SKOCH Financial Inclusion & Deepening Award 2014 for its initiatives in affordable housing. The Gold Award for affordable housing was presented by Ms Meenakshi Lekhi, Member of Parliament at a ceremony on June 21, 2014 at New Delhi. The Award was received by Mr Arnab Roy, ED, NHB in the presence of Mr Sameer Kochhar, Chairman, SKOCH Group and Mr Vinod Rai, Former Comptroller and Auditor General of India. § NHB's in-house magazine “Aawas Bharti” was awarded first prize for the year 2012-13 by RBI. § "Awas Bharti" was also awarded first prize from Delhi Bank Town Official Language Implementation Committee (TOLIC).

154 ANNUAL REPORT 2013-14

Box 3

Launch of the Report on the State of Low Income Housing Market in India by Monitor Deloitte Group

The Monitor Deloitte Group with support from the National Housing Bank launched a report on the State of Low Income Housing Market in India on July 31, 2013. The report was launched with a focus on the affordable housing segment in India, its importance, need and the growing role of the private sector in increasing the supply to this segment especially the developers. Some key findings include:

§ Steady increase in supply of LIH units: Atleast 78,000 LIH units between INR 3-10 lakh launched in the last 5 years § Thriving Housing Finance Industry: New HFCs have built a combined loan book of INR 1,000 crore. A number of housing finance companies are now actively lending in the below INR 10 lakh market. § Absorption of LIH Supply: LIH projects have sold well across the surveyed cities and most of the potential customers were eager to move into a new house § Government's Cognizance of the Role of Private Sector Supply: Governments at States and ULBs have built and continue to build housing for the urban poor. But the rapid urbanization has left a huge gap between the need in EWS and LIG segments and supply Governments are leveraging private sector players to bridge the housing gap by mandating developers to make housing for EWS / LIG, providing subsidy and creating an enabling environment so developers produce more housing for LMIG / MIG segment etc and by setting standards to facilitate the market. § The report also highlights the characteristics of LIH supply in the market like the minimum price point, most prevalent formats, customers' preferences, besides giving insights on low income housing developers § The launch of this report endeavors to attract new developers to the low-income housing space and get existing developers to build more units by providing them with information on customer insights, market trends, current housing and financing activity and characteristics of supply. The report which has been compiled after analyzing data from almost 132 LIH projects across 22 cities, will also support the Government, international development agencies and foundations in their decision making process and provide them with a fact base of “on the ground” data.

Awards and Accolades: Left: Shri Arnab Roy, ED, NHB, receiving the SKOCH Financial Inclusion & Deepening Award 2014 Middle: Shri R.S.Garg, ED, NHB at the ADFIAP “Outstanding Development Project Awards, 2014 Right: NHB officials receiving the TOLIC award for "Aawas Bharti"

155 ANNUAL REPORT 2013-14

III.2 RESOURCE MOBILIZATION

NHB was incorporated with an initial capital of` 100 crore. As on June 30, 2014, the issued, the subscribed and paid-up shares capital were ` 450.00 crore as shown below:

Table 3: Share Capital

Share Capital (` in crore) (A) Authorized Share Capital 450.00 (B) Issued, Subscribed and paid-up 450.00 Share Capital (Wholly subscribed by Reserve Bank of India)

NHB raised both — short term and long term resources during the year. Short term resources included issuance of Commercial Papers (CPs) and short term loans from Banks. Long term borrowings includes issuance of Coupon Bonds, Rural Housing Fund (RHF), Deposits from Housing Finance Companies (HFCs) and Deposits from public under (SUNIDH and SUVRIDDHI) term deposit schemes. The net incremental borrowing was` 17,066 crore for the year ended June 30, 2014. The total borrowing outstanding as on June, 30 2014 was` 39,463 crore as given in Table 4.

Table 4: Total Borrowing Outstanding (` in crore)

Resource Amount

Deposits from Public 268

Borrowings - CBLO 2336

UHF 1000

RHF 17278

Foreign Borrowings 908

Borrowings from RBI 13

Term Loans 5943

Loan Against Deposits 541

Bonds and Debentures 11176

Total 39463

156 ANNUAL REPORT 2013-14

Deposits Borrowings- from Public CBLO UHF Bonds and 1% 6% 3% Debentures 28%

Loan Against Deposits 1% RHF Term Loans 44% 15% Borrowing Foreign from RBI Borrowings 0.03% 2%

G3. Borrowing Outstanding as on 30th June 2014

III.2.a Main Avenues of Resource Raising

Rural Housing Fund (RHF)

Rural Housing Fund was established in 2008-09 by an announcement by the Hon'ble Finance Minister and is being administered by National Housing Bank. Contributions to this Fund are based on the allocation made by Reserve Bank of India to various Banks on the basis of short fall in their priority sector lending. As against allocation of` 6,000 crore for the year 2013-14, the Bank has received an amount of` 4,500 crore till the end of June 30, 2014 (2013-14). The position of RHF mobilized year-wise till June 30, 2014 is as shown in Table 5:

Table 5: Position of RHF mobilized year-wise (` in crore)

Year RHF Allocations Amount received 2008 -2009 2000 1,778 2009 -2010 2000 2,000 2010 -2011 2000 2,000 2011 -2012 3000 3,000 2012 -2013 4000 4,000 2013 -2014 6000 4,500 Total 19000 17,278

157 ANNUAL REPORT 2013-14

Urban Housing Fund (UHF)

Urban Housing Fund was established during the year by the Hon'ble Finance Minister for augmenting the resources of National Housing Bank for this sector. As against allocation of` 2,000 crore for the year 2013-14, the Bank has received an amount of` 1,000 crore till the end of June 30, 2014 (2013-14).The position of UHF mobilized year-wise till date is as follows:

Table 6: UHF Mobilized year-wise (` in crore)

Year UHF Allocations Amount received 2013-14 2000 1000

Bonds

§ NHB Bonds: NHB Bonds issued are rated" AAA" by atleast two of the rating agencies approved by SEBI viz. CARE ratings, CRISIL, Fitch ratings and Brickwork ratings and are listed on National NHB has entered into a Stock Exchange. These ratings indicate highest degree of certainty collaboration with Department regarding timely payment of financial obligation on the for International Development instruments. Bonds for a face value of` 1,500 crore were issued (DFID), Government of UK for a during the year. project namely "Making affordable housing market work § for faster and sustained economic Tax-Free Bonds: CBDT vide Gazette Notification dated August 8, growth" in eight low income 2013 authorized NHB to issue tax-free secured redeemable non- states of the country convertible Bonds aggregating to` 3,000 crore during the financial year 2013-14. Against this allocation, the Bank raised` 900 crore through private placement. The Balance amount of` 2,100 crore was mobilized through Public Issue. At the request of the Bank, CBDT further authorized NHB to issue tax-free Bonds up to ` 1000 crore vide notification dated February 13, 2014. This amount was fully raised through public offer. Both the public issues had tremendous response and were oversubscribed on the first day itself. All the tax-free bonds are listed on the National Stock Exchange. The total amount mobilized through tax-free Bonds is ` 4,000 crore.

DETAILS OF DEBENTURE TRUSTEE FOR TAX-FREE BONDS FOR OTHER BONDS Compliance Officer : Compliance Officer : IL&FS Trust Company Ltd. IDBI Trusteeslip Services Limited The IL & FS Financial Center Asian Building, Ground Floor Plot No. C-22, G Block, Bandra Kurla Complex 17, R Kamani Marg Ballard Estate Bandra(E), Mumbai 400051 Mumbai Maharashtra-400001 (India) Ph.: +91-22-26593612, Fax : +91-22-26533297 Ph. :+91-22-40807000, Fax : +91-22-66311776 Email : [email protected] Email : [email protected] Web : www.itclindia.com Web :www.idbitrustee.com

158 ANNUAL REPORT 2013-14

Deposits from Public NHB mobilises resources through two public deposit schemes viz. "SUNIDHI" and "SUVRIDDHI". While SUNIDHI is a regular deposit schemes, SUVRIDDHI is a Term Deposit scheme for five years and is notified under section 80C of Income Tax. Both the schemes are as per the guidelines of RBI in this regard. The total amount mobilised under both the schemes was` 84 crore during the year 2013-14. Foreign Borrowings

§ The Bank entered into agreements with KfW, Germany during the year 2010-11 for financing "Energy Efficient New Residential Housing" in India. The programme is under an agreement of May, 2009 between the Government of the Federal Republic of Germany and Government of India on financial co-operation. The total line of credit under the programme is Euro 50 million. During the year 2013-14, the Bank has drawn Euro 24.36 mn (` 206.79 crore) and with this the Bank has completely utilized the line of credit. § Under the umbrella of India-UK bi-lateral development co- operation partnership agreed between the two countries in July 2011, NHB has entered into a collaboration with Department for International Development (DFID), Government of UK for a project namely "Making affordable housing market work for faster and sustained economic growth" in eight low income states of the country. Under the project, DFID provides a total assistance of £50 million. The Bank has drawn £ 9 million during 2013-14(` 90.20crore). III.3 DEPLOYMENT OF FUNDS III.3.a Refinance Disbursement During the year 2013-14, NHB's refinance disbursements touched the highest ever figure of` 17,856.18 crore, registering an increase of 1.79% over the disbursements of` 17,541.64 crore made in 2012-13. The details of disbursements during 2013-14 as compared to previous year are as given in Table 7: Table 7: Institution-wise break-up of NHB's Refinance disbursements in the year 2013-14 (` in crore)

Primary Lending Institution 2012 - 2013 Percentage 2013 - 2014 Percentage Disbursements of total Disbursements of total

Housing Finance Companies 7,693.51 43.86% 9,632.99 53.95% Scheduled Commercial Banks 9,459.33 53.93% 7,942.72 44.48% Regional Rural Banks 388.8 2.22% 280.47 1.57% Co-operative Sector 0 0.00% 0 0.00% Total 17,541.64 100.00% 17,856.18 100.00%

159 ANNUAL REPORT 2013-14

Out of the total refinance Institution-wise break-up of NHB’s Refinance disbursement in 2013-14, 43% ` was towards rural housing Disbursements in the year 2013-14 (in crore)

2% Housing Finance Companies Scheduled Commercial Banks Regional Rural Banks

Co-operative Setor

G.4 : Institution wise break-up of NHB's Refinance Disbursement in the year 2013-14 ( in` crore)

Out of the total refinance disbursements of` 17,856.18 crore, ` 7689.97 crore were disbursed for rural housing under the Bank's two rural housing refinance schemes viz. the Golden Jubilee Rural Housing Refinance Scheme (GJRHRS) and the Rural Housing Fund (RHF), together constituting 43% of the total disbursements.

The break-up of the disbursements made to different categories of institutions under different schemes during 2013-14 is as shown in Table 8 ( in` crore):

Table 8: Disbursements made to different categories of institutions under different schemes (` in crore) Achievement Scheme HFCs SCBs RRBs Total

Regular 2,420.88 5,178.46 0.00 7,599.34 GJR HRS 3,556.31 420.00 186.35 4,162.66 Housing 2,409.80 1,023.39 94.12 3,527.31 RHF Solar 0.00 0.00 0.00 0.00 EEHRS 83.90 113.58 0.00 197.48 LIH 328.98 212.00 0.00 540.98 Solar (Non RHF) 0.00 0.00 0.00 0.00 UHF 145.60 744.50 0.00 890.10 Women 687.52 250.79 0.00 938.31 Total 9,632.99 7,942.72 280.47 17,856.18

160 ANNUAL REPORT 2013-14

G.5 NHB's disbursements made to different categories of institutions under different schemes during 2013-14 ( in` crore)

18000 16000 14000 12000 HFCs 10000 SCBs 8000 6000 RRBs 4000 Total 2000 0

Regular GJRHRS RHF EEHRS LIH Solar UHF Women Total (Non RHF)

Loan Size-wise Break-up of Disbursements The break-up of refinance disbursements in 2013-14 on the basis of size of underlying individual housing loans is shown in Table 9.

Table 9: Loan size-wise break-up of disbursements (` in crore)

Slab Amount % of Total ` 81.82% of the Bank's Upto 2 lakh 1,455.33 8.15 disbursements during 2013-14 > ``2 lakh and upto 5 lakh 2,004.93 11.23 were made in respect of individual > ``5 lakh and upto 10 lakh 2,712.37 15.19 housing loans upto` 25 lakh. > ``10 lakh and upto 15 lakh 6,188.34 34.66 > ``15 lakh and upto 25 lakh 2,249.51 12.60 > ` 25 lakh 2,930.70 16.41 Prospective 315.00 1.76 Total 17,856.18 100.00

G.6 Loan Size-wise Break-up of NHB's Refinance Disbursements during the year 2013-14

Upto Rs. 2 lakhs

> Rs. 2 lakhs and upto Rs. 5 lakhs

> Rs. 5 lakhs and upto Rs. 10 lakhs

> Rs. 10 lakhs and upto Rs. 15 lakhs

161 ANNUAL REPORT 2013-14 153

Thus, 81.82% of the Bank's disbursements during 2013-14 were made in respect of individual housing loans upto` 25 lakh.

III.3.b Tenure-wise break-up of Bank's Refinance Disbursements during the year 2013-14

The tenure-wise break-up of the refinance disbursement is shown below. As shown in the Table 10.1 out of the total refinance disbursed in 2013-14, nearly 59 percent represented long term refinance having repayment period of 5 years or above.

Table 10: Tenure wise break-up of refinance disbursements (` in crore) Period of Amount Percentage of Refinance Total

Upto 1 year 448.33 2.51 1 year to 3 years 5,444.00 30.49

3 years to 5 1,445.19 8.09 years

5 years to 7 4,408.94 24.69 years

7 years to 10 1,754.39 9.83 years

Over 10 years 4,355.33 24.39

G.7 Tenure wise Breakup of Bank’s Refinance Disbursements during the year 2013-14

Upto 1 year 1 year to 3 years 3 years to 5 years 5 years to 7 years 7 years to 10 years Over 10 years

162 ANNUAL REPORT 2013-14

III.3.c Disbursements in respect of Housing Loans in Rural and Urban Areas

The break-up of annual refinance disbursements against individual housing loans in rural and urban areas during the seven year period 2007-08 to 2013-14 is given in Table 11. Table 11 (` in crore) Year Total Rural Urban Disbursements GJRHFS RHF Amount Percentage Amount Percentage Amount Percentage of Total of Total of Total 2007 -08 8,586.89 3,856.19 44.91 4,730.70 55.09 2008 -09 10,853.62 718.44 6.62 1,761.5 16.23 8,373.70 77.15 2009 -10 8,107.76 1,680 20.72 2,015.8 24.86 4,411.94 54.42 2010 -11 11,722.79 3,781.92 32.26 2,003.7 17.09 5,937.21 50.65 2011 -12 14,389.91 2,604.51 18.1 3,003 20.87 8,782.37 61.03 2012 -13 17,541.64 3,690.18 21. 03 4,027.4 22.95 9,824.04 56.0 2 2013 -14 17,856.18 4162.66 23.31 3527.31 19.75 10166.21 56.9 4

Urban Rural

G.8 Break-up of Annual Refinance Disbursements - Rural and Urban Areas

Performance under Rural Housing Schemes

Out of the total refinance disbursements of` 17,856.18 crore in 2013-14, 43.07% aggregating` 7689.97 crore were made for rural housing loans, under the Rural Housing Fund (RHF) and the Golden Jubilee Rural Housing Refinance Scheme (GJRHRS). The break-up of the refinance disbursements made for rural housing is shown in Table 12.

163 ANNUAL REPORT 2013-14

Table 12 (` in crore)

Institution Category Amount Percentage of Total

Housing Finance Companies 5,966.11 77.58 Scheduled Commercial Banks 1,443.39 18.77 Regional Rural Banks 280.47 3.65 Total 7,689.97 100.00

` 8,000 crore has been allocated III.3. d Rural Housing Fund (RHF) to NHB under RHF in the Union Budget 2014-15 The Hon'ble Finance Minister, in his Union Budget speech for 2008-09, announced the setting up of the Rural Housing Fund to enable primary lending institutions to access funds for extending housing finance to targeted groups in rural areas at competitive rates. The corpus of the fund for 2008-09 was`` 1,778.18 crore, which was enhanced to 2,000 crore for 2009-10 and 2010-11, to` 3,000 crore for 2011-12,` 4,000 crore for 2012-13 and further enhanced to` 6000 crore for 2013-14 . The break-up of the disbursements made for RHF in the last Six years is shown in Table 13

Table 13 (` in crore) Year Alloca- Utilization across various Institutions tion HFCs SCBs UCBs RRBs ACHFS & Total No. of ARDBs Units 2008-09 1778.18 1544.88 0.00 15.00 201.60 0.00 1761.48 95577 2009-10 2000.00 1794.86 0.00 4.00 184.96 32.00 2015.82 70995 2010-11 2000.00 1687.54 182.00 0.00 134.12 0.00 2003.66 42859 2011-12 3000.00 2125.25 721.42 13.32 143.04 0.00 3003.03 126795 2012-13 4000.00 1939.94 1802.03 0.00 285.45 0.00 4027.42 356480 2013-14 6000.00 2409.80 1023.39 0.00 94.12 0.00 3527.31 535299 Total 18778.18 11502.27 3728.84 32.32 1043.29 32.00 16338.72 1228005

G.9 RHF Utilization amongst G.10 RHF Allocation vs various PLIs Utilization

HFCs

SCBs

UCBs

RRBs Allocation Utilization

Further, in the Union Budget of 2014-15,` 8,000 crore has been allocated to NHB under RHF.

164 ANNUAL REPORT 2013-14

III.3.e Refinance for Energy Efficient Housing

NHB, in partnership with KfW, Germany, is promoting energy efficiency in the housing sector. The Bank, in 2010-11, launched the Energy Efficient Housing Refinance Scheme (EEHRS), aimed at encouraging energy efficiency in the residential sector. During the year 2013-14, refinance disbursements aggregating` 197.48 crore were made under this scheme. The refinance assistance under the scheme is expected to improve the demand for energy efficient residential units. The break-up of the disbursements made under Energy Efficient Housing Refinance Scheme is given in Table 14.

Table 14 (` in crore) Year Amount

2011- 12 128.96

2012- 13 103.77

2013- 14 197.48

Total 430.21

III.3.f New Refinance Schemes Launched

The Bank has launched two new schemes during the year 2013-14. These are:

Refinance Scheme for Women

In order to improve the flow of formal housing finance to women in urban areas, it was felt by NHB that a Special Refinance Scheme for Women may be launched whereby the retail lending institutions are encouraged to improve their housing finance to women borrowers. This Scheme will help in encouraging women to acquire residential property in their own name thus enabling empowerment amongst them. The Scheme envisages providing refinance assistance to PLIs at concessional rates in respect of their housing loans where the primary borrower is a woman and the property is solely or jointly owned by women. Refinance under the scheme would be available at concessional interest rates upto of 100 bps below the Bank's Prime Lending Rate. The interest rate concession would be offered in a graded manner, with emphasis being placed on encouraging lower ticket size loans.

The scheme is being implemented through all eligible PLIs having pan India presence. During the year 2013-14, Bank has made disbursement of` 938.31 crore under the scheme.

165 ANNUAL REPORT 2013-14

Urban Housing Fund (UHF)

In the Union Budget 2013-14, the Hon'ble Finance Minister made the announcement regarding the establishment of an Urban Housing Fund, having corpus of` 2000 crore. Accordingly, the National Housing Bank formulated a new refinance scheme for channelizing funds into the urban housing sector. The scheme seeks to augment resources improve credit availability and meet the housing needs of the people in lower income segments residing in urban areas.

During the year 2013-14, Bank has made disbursement of` 890.10 crore under the scheme.

Table 15: Disbursement under UHF (` in crore) Year Allocation Utilization Institution Category The Bank has made cumulative refinance disbursements of ` HFCs SCBs UCBs RRBs ACHFS & Total No. of 1,20,484.79 crore till date ARDBs Units

2013-14 2000.00 145.60 744.50 0.00 0.00 0.00 890.10 18310 Total 2000.00 145.60 744.50 0.00 0.00 0.00 890.10 18310

III.3. g NHB's Cumulative Refinance Disbursement Upto 2013-14

The Bank has made cumulative refinance disbursements (from inception till 30-06-2014) of` 1,20,484.79 crore, the break-up of which is given in Table 16.

Table 16 : Cumulative refinance disbursements upto 2013-14.

(` in crore) Institutions Amount % of Total

Housing Finance Companies 51569.01 42.80

Scheduled Commercial Banks 64967.97 53.92

Regional Rural Banks 1422.63 1.18

Co-operative Sector 2525.18 2.10

Total 120484.79 100 .00

Out of the total cumulative disbursements of` 120484.79 crore, 54 percent were made to Scheduled Commercial Banks and 43 percent to Housing Finance Companies. The remaining was made to various Regional Rural Banks and Co-operative Sectors Institutions. A tabular representation of the trend of Refinance from 1999-2000 to 2013-14 is given in Table 17.

166 ANNUAL REPORT 2013-14

Table 17: Trend of Refinance Disbursements (` in crore)

Year Disbursements Cumulative Disbursements

1999 - 00 842 4,235 2000 - 01 1,008 5,243 2001 - 02 1,025 6,268 2002 - 03 2,710 8,978 2003 - 04 3,253 12,231 2004 - 05 8,062 20,293 2005 - 06 5,632 25,925 2006 - 07 5,500 31,425 2007 - 08 8,587 40,012 2008 - 09 10,854 50,866 2009 - 10 8,108 58,974 2010 - 11 11,723 70,697 2011 - 12 14,390 85,087 2012 - 13 17,542 1,02,629 2013 - 14 17,856 1,20,485

G 11. Trend of Refinance from 1999-2000 to 2013-14 120100

100100

80100

60100

40100

20100

100 0246810121416

Disbursements Cumulative Disbursements

III.4 SANCTIONS AND DISBURSEMENTS THROUGH DIRECT FINANCE

NHB provides direct financial assistance for project lending to a range of borrowers in the public and public-private partnership, micro finance institutions, state level housing boards and area development authorities for large scale integrated housing projects and slum redevelopment projects.

167 ANNUAL REPORT 2013-14

III.4 a. Project Finance and Technology Promotion

During the year 2013-14, NHB has sanctioned project finance assistance for one project amounting to`` 125.00 crore and disbursed 34.26 crore. The disbursements were made to public agencies and a dairy co-operative.

III.4.b. Housing Micro Finance Programme

NHB's Housing Micro Finance (HMF) programme started in 2004-2005. Through housing micro finance, NHB has been providing long term financial support, technical assistance and training for housing finance for low income families. Under the programme, NHB has sanctioned `101.68 crore to 31 Microfinance Institutions spread across 11 states for financing 40,210 urban and rural housing/sanitation units. The beneficiaries include farmers, petty traders, artisans, dairy workers and other low income households. More than 90% of the beneficiaries are women.

III.4.c. Cumulative Performance (Excluding project refinance)

Till June 30, 2014, 445 projects were sanctioned having project cost of ``6964.37 crore and loan component of 5121.92 crore to provide low income housing for the poor and has financed various agencies including Public Housing Agencies, MFIs, NGOs and Public Private Partnership projects. Till June 30, 2014, the Bank has disbursed` 2233.54 crore as project finance. The table 18 shows the trend of NHB project finance disbursement since 2002-2003.

Table 18: Trend of NHB's Project Finance Disbursements (` in crore)

Year Sanctioned Disbursement No. of Houses Category to which Funding Amount Amount Benefited viz. MFI, PPP etc. 2002-2003 84.46 73.06 Cumulatively Category of Funding NHB has includes: 2003-2004 83.80 44.49 extended financial Housing Boards, 2004-2005 197.82 27.16 assistance for Development Authorities, construction of Municipal Corporations, 2005-2006 537.29 364.55 houses and State Housing Corporations, Welfare 2006-2007 560.82 171.60 housing related infrastructure for HousingOrganizations, 2007-2008 819.50 449.49 around 1,25,000 Micro Finance Institutions, houses Non-Governmental 2008-2009 248.30 35.41 Organizations, Dairy Co-operatives and Public 2009-2010 312.07 51.53 Private Partnership 2010-2011 78.80 311.78 Companies 2011-2012 314.30 63.72 2012-2013 154.26 92.89 2013-2014 125 34.26

168 ANNUAL REPORT 2013-14

III.4.d UN-Habitat WATSAN program

The Bank has entered into an Agreement of Co-operation with UN Habitat for collaborating on water supply and sanitation projects for low income households. Under the terms of the Agreement, UN Habitat will provide financial assistance to the tune of US $ 3,75,000 through NHB for the water and sanitation component of housing micro finance projects as well as for standalone water and sanitation projects, and also for capacity building and training efforts in this field. NHB shall act as the nodal As per the Agreement of Co-operation signed between NHB and UN agency for deciding a project’s Habitat, the first and second instalments of US $ 1,23,750 and eligibility as a low cost affordable US $ 1,27,500 respectively had been received by the Bank in March housing project 2011. Under the Revolving Fund of UN-Habitat, the Bank has extended financial assistance of` 1.00 crore to Friends of Women World Banking, Ahmedabad and` 1.10 crore to Kaira District Co- operative Milk Producers' Union Ltd. for construction of toilets.

III.4.e. External Commercial Borrowings for Affordable Housing Projects.

In terms of the RBI Circular A.P. (DIR Series) Circular No. 61 dated December 17, 2012, relating to the ECB policy, it has been decided to allow ECB for low cost affordable housing projects as a permissible end-use, under the approval route. ECB can be availed of by developers/builders for low cost affordable housing projects. As per the extant circular, “builders/developers meeting the eligibility criteria have to apply to the National Housing Bank (NHB) in the prescribed format. NHB shall act as the nodal agency for deciding a project's eligibility as a low cost affordable housing project, and on being satisfied, forward the application to the Reserve Bank of India for consideration under the approval route. In the year 2013-14, NHB has forwarded two proposals from developers for USD 18 million to RBI under these guidelines.

Box 4

Report On - "Scaling Up Housing Microfinance" by National Housing Bank in collaboration with IFMR Capital and DFID, UK.

The Bank collaborated with IFMR Capital and DFID UK to carry a study on "Scaling up of Housing Micro finance in India" with the objective of evaluating NHB's housing micro finance programme and studying the savings pattern of select informal sector households. Further, the study endeavored to develop a savings-linked housing finance product and understand the potential of the SHG-Bank Linkage model for a housing finance product. The study examined micro finance institutions and non- government organizations working in the area of housing micro finance in ten states.

169 ANNUAL REPORT 2013-14

Recommendations of the study

a) Wholesale Financing- Funding Model § In order to enable continuous and dependable flow of finance for wholesale financing of housing micro finance, the funding model proposed in this study is based on the principles of incentive alignment and active risk management. § It is imperative that for the purpose of ensuring an efficient system design for housing micro finance, a structure is built where there is first loss provision from the originator MFI. § In order to facilitate confidence amongst banks to lend through the MFIs, a structure where NHB/institution provides a second loss protection in the form of a guarantee is much required. The idea is to partner with a forward looking bank and demonstrate a model of funding which can then be replicated in future by other guarantee agencies.

b) Role of the National Housing Bank § Significant support from NHB would be required to train the NGO- MFI staff on helping their clients in formalizing their land titles during the course of the loan disbursal process. § NHB may proactively work towards developing sound financing structures to support the program. Providing second loss guarantees that add an additional line of protection for participating banks, would incentivise banks to participate in such a program, while at the same time ensuring that the banks retain risk over and above the first loss provided by the NGO-MFI and second loss from the NHB. § NHB may also consider continuing its focus on capacity building specifically targeting NGO-MFIs for this purpose. Assistance in the form of imparting skills required for originating housing loans as a departure from the conventional group liability product would be key in ensuring that the NGO-MFI originates high quality loans. § NHB has to play a role in training staff on institutionalizing the process of formalizing land titles. This would not only have a widespread impact on the land rights of the lower income households but would also unlock a huge market which currently is served by the informal sources of finance. In addition, the housing finance companies will have a larger market of properties with good title to finance. § There is a clear need for institutions which can keep a direct tab on the NGO-MFI partners and push improvement. In scaling up the housing micro finance program, NHB may consider partnering with market participants, such that NHB plays the role of a facilitator and enabler.

The Report can be accessed from NHB's website at www.nhb.org.in

170 ANNUAL REPORT 2013-14

III.5 REGULATION AND SUPERVISION

The Bank regulates and supervises the Housing Finance Companies (HFCs) in the public interest, as per provisions of the National Housing Bank Act, 1987. As on June 30, 2014, the total number of HFCs registered with NHB stood at 59, of which 18 HFCs have been provided Certificate of Registration (CoR) with permission to accept public deposits and the balance 41 HFCs have been granted CoR As on June 30, 2014, there are 59 without permission to accept public deposits. Of the 18 HFCs, which HFCs registered with NHB have been provided CoR with permission to accept public deposits, 6 are required to obtain prior written permission from the National Housing Bank before accepting any public deposits.

NHB's regulation and supervision is aimed at preventing the affairs of any HFC being conducted in a manner detrimental to the interest of the depositors and prejudicial to the public interest. As a part of its regulations, the Bank has also issued the Directions, Guidelines for Asset Liability Management System in HFCs, Know Your Customer (KYC) and Anti Money Laundering (AML), Fair Practice Code, etc., and Circulars to the HFCs and their auditors, from time to time, in addition to the provisions contained in the NHB Act. The Bank also undertakes on-site inspection and off-site surveillance of HFCs through its supervisory mechanism to ensure safety and soundness of HFCs.

Further, to provide value to the stakeholders, a Complaint Redressal Cell has been set up to redress the grievances of the customers of HFCs. Recently, the Bank has implemented Grievance Registration & Information Database System (GRIDS) to enable the customers of HFC for online registration and tracking of complaints. In order to contain frauds in housing finance, the Bank, regularly disseminates information on frauds relating to mortgages to HFCs through Caution Advices, and also interacts with other regulators for market feedback.

III.5.a. Registration/ Cancellation of Certificate of Registration granted to HFCs

Registration

During the year, the Bank has granted CoR to 3 HFCs viz. VIVA Home Finance Ltd., Aspire Home Finance Corporation Ltd. and Muthoot Homefin (India) Ltd. for commencement of business as housing finance institutions.

Cancellation

The Bank cancelled the CoR of one company viz. Habitat Housing Finance Ltd., due to non-compliance with the provisions of the National Housing Bank Act, 1987.

171 ANNUAL REPORT 2013-14

III.5.b Supervision of HFCs

NHB supervises the functioning of HFCs through on-site inspections, market intelligence and off-site surveillance mechanisms, through periodical returns/ information and their verification.

On-site Inspections

During the year, NHB inspected 58 companies, out of which 7 were to assess the eligibility of companies, which has applied for CoR under Section 29A of the National Housing Bank Act, 1987. Balance 51 inspections were on HFCs to ascertain their compliances with various regulatory provisions of the National Housing Bank Act, 1987, and directions, guidelines, circulars etc. issued thereunder by the Bank, from time to time.

Off-site Surveillance

Periodical returns submitted by HFCs, including the quarterly, half- yearly and annual returns prescribed in the Directions were monitored and scrutinized.

III.5.c. Grievance Registration and Information Database System (GRIDS)

NHB has set up Complaint Cell to ensure prompt redressal of customer complaints and grievances against HFCs, and also uploaded the complete details on NHB Website (http://www.nhb.org.in/Regulation /Complaint_Cell) regarding role of the Complaint Cell for addressing the complaints received from customers of HFCs.

The bank has launched on-line Dr. Gurdial Singh Sandhu, IAS, Secretary to Government of India, Grievance Registration & Ministry of Finance, Department of Financial Services launched the Information Database System Grievance Registration & Information Database System (GRIDS) on July (GRIDS) on July 01, 2014 1, 2014. GRIDS is now available to customers of HFCs for 24x7 on-line lodging of their grievances. GRIDS, developed by NHB, is a 24x7 on-line database system, which facilitates mainly the customer of HFC to lodge a complaint, and also track its status. GRIDS enables instant on-line updating of response to a complaint by HFC/NHB and also facilitates in viewing the latest status at any time by the Complainant/HFC/NHB from a centralized database. This would not only bring about transparency in Grievance Redressal Mechanism, but also reduce turnaround time on the disposal of complaints.

The Bank is also the member organization of Centralized Grievance Redress and Monitoring System (CPGRAMS) of Department of Administrative Reforms and Public Grievances (DARPG) which is aimed at providing the citizens with a platform for redressal of their grievances. The complaints received on Payment Gateway Portal

172 ANNUAL REPORT 2013-14 related to NHB are being monitored on a regular basis and are promptly disposed off.

During the financial year 2013-14, a total of 668 complaints were received by the Bank, out of which 580 were closed, and the remaining have been under regular monitoring for their early disposal.

III.5.d. Notifications, Circulars, and Caution Advices Issued

Notifications

(a) During the year, three amendments have been made in the Housing Finance Companies (NHB) Directions, 2010, viz.

1. Amendments have been made on September 6, 2013 in

§ Paragraph 2 (1) (v) for substituting the overdue period from “ninety days or more” to “more than ninety days” under non- performing asset definition;

§ Paragraph 4 (b) for changing the period of acceptance or renewal of public deposit from eighty four months to one hundred and twenty months;

§ Insertion of new Paragraph 11 (3) for following the procedure in regard to the payment of interest on overdue public deposits which have either been seized by the government authorities, and/or have been frozen till further clearance is received by the concerned Government authorities;

§ Paragraph 12 (iv) for changing the period of intimation regarding the details of maturity of the deposit to the depositor from atleast two months to atleast fourteen days before the date of maturity of the deposit;

§ Substitution in paragraph 27A relating to LTV ratios for granting loans to individuals under three slabs instead of earlier two slabs, as well as for introducing new provision for maintaining a LTV ratio for loans granted against the collateral of gold jewellery;

§ Modification in paragraph 28 (1) (iv) (b) (i) and (ii) to define and prescribe the provision on standard assets in respect of Commercial Real Estate (residential housing) and Commercial Real Estate;

173 ANNUAL REPORT 2013-14

§ Substitution in Paragraph 29 advising HFCs to disclose the outstanding amount and the provisions under separate heads of accounts and individually for each type of assets, and percentage of outstanding loans granted against the collateral of gold jewellery to their outstanding total assets;

§ Substitution in Paragraph 30 for reducing the earlier prescribed the risk weights for individual housing loans under Standard Asset Category, and including Commercial Real Estate - Residential Housing, other Commercial Real Estate and restructured housing loans;

§ Insertion in Paragraph 32A for providing clarification that the partnership firms mentioned under sub-paragraph (1) and (2) will also include Limited Liability Partnerships (LLPS) and the prohibition will also be applicable with respect to Association of Persons;

§ Insertion of new paragraph 38A stating that no HFC shall grant any loan or advance against bullion/primary gold and gold coins, and for purchase of gold in any form including primary gold, gold bullion, gold jewellery, gold coins, units of Exchange Traded Funds (ETF) and units of gold mutual fund; and

§ Making corresponding changes in the Schedule I and Schedule II.

2. Amendments have been made on March 19, 2014 in

§ Paragraph 2 (1) (y) (vi) for substituting the words “with an option to convert them into shares” with the words “which would be compulsorily convertible into equity";

§ Paragraph 2 (1) (y) (ix) by adding the words “provided there is no option for recall by the issuer within the period" at the end;

§ Paragraph 12 (v) by adding the words "or grant of loan by a problem housing finance company, subject to sub-paragraph (vii) below." at the end;

§ Insertion of new Paragraph 17 (1) (h) (i) for specifying in the advertisement that deposits solicited by HFC are not insured, and

§ Insertion of new Paragraph 17 (1)(A) for specifying certain provisions pertaining to display of advertisement in electronic media by HFCs.

174 ANNUAL REPORT 2013-14

3. Amendments have been made on June 13, 2014 in

§ Paragraph 2 (1) (e), the words, “Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997” have been substituted with “Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011”;

§ Paragraph 19 of the Directions, to obtain prior written permission of the National Housing Bank for any takeover or acquisition of control of a housing finance company, whether by acquisition of shares or otherwise; any merger/amalgamation of a housing finance company with another entity or any merger/amalgamation of an entity with a housing finance company that would give the acquirer/another entity control of the housing finance company; any merger/amalgamation of a housing finance company with another entity or any merger/amalgamation of an entity with a housing finance company which would result in acquisition/transfer of shareholding in excess of 10 percent of the paid up capital of the housing finance company. Further, prior written approval of the National Housing Bank would also be required before approaching the Court or Tribunal under Section 391-394 of the Companies Act, 1956 or Section 230-233 of Companies Act, 2013 seeking order for mergers or amalgamations with other companies or HFCs.

(b) During the year, new Directions, namely, the Housing Finance Companies issuance of Non-Convertible Debentures on private placement basis (NHB) Directions, 2014 have been issued to rationalize the Non-Convertible Debentures issued by HFCs through private placements, since its share was about 50% of their outstanding borrowings as on 31-03-2013. The said Directions has come into force on 1st April 2014 and shall be applicable to every housing finance company registered under section 29A of the National Housing Bank Act, 1987 (53 of 1987) unless otherwise directed by the National Housing Bank.

Circulars

(a) Ready Forward Transaction in Government Securities and Accounting thereof: The Bank has clarified that HFCs can enter into ready forward contracts in Government securities subject to the terms and conditions contained in RBI Circular IDMC/PDRS/3432/10.02.01/ 2002-03 dated February 21, 2003, as amended from time to time. HFCs are also advised to follow revised guidelines for accounting of repo and reverse repo transactions both in Government securities and in corporate

175 ANNUAL REPORT 2013-14

debt securities as issued by RBI vide its circular IDMD/4135/11.08.43/ 2009-10 dated March 23, 2010 or any subsequent modification thereof.

(b) Disbursement of housing loan to individual linked to the stages of construction: The Bank has advised HFCs that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project/houses and upfront disbursal should not be made in cases of incomplete/under-construction/green field housing project/houses. It is also reiterated that HFCs while introducing any kind of product should take into account the customer suitability and appropriateness issue and also ensure that the borrowers/customers are made fully aware of the risks and liabilities under such products.

(c) Central Know Your Customer Registry: The Bank has sought comments/suggestions from HFCs on the common KYC templates (individual and non-individual) designed by it. HFCs are also requested to take necessary steps and measures required to be in a state of preparedness for on-line uploading of the KYC particulars and documents on the CKYCR portal/ website, as and when, the same is advised.

(d) Guidelines on Know Your Customer & Anti Money Laundering Measures — Obligation of HFCs under Prevention of Money Laundering Act, 2002: The Bank has stated that the letter issued by the Unique Identification Authority of India containing details of name, address and Aadhaar number is an officially valid document within the meaning of Rule 2(1)(d) of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 and, therefore, can be relied upon by a HFC for the purposes of Rule 9 of the said Rules. Further, it also clarified that if the address provided by the customer is the same on the document submitted for identity proof, the document may be accepted as a proof of both identity and address.

(e) Reserve Fund under Section 29C of the NHB Act, 1987: The Bank has devised a format, in order to bring the uniformity in the matter of presentation of the said Reserve Fund in the annual accounts of the HFCs under the heading 'Notes forming part of the financial statements'.

(f) Creation of Deferred Tax Liability on Special Reserve maintained by HFCs under Section 36(1) (viii) of the Income Tax Act, 1961: The Bank has advised HFCs to create DTL on Special Reserve under Section 36(1)(viii) of the Income Tax Act, 1961.

176 ANNUAL REPORT 2013-14

Caution Advices

An initiative was taken by NHB to issue Caution Advices to all the HFCs on the lines of similar information being shared by the Reserve Bank of India/ Indian Banks Association to member banks. The HFCs are required to submit information on fraudulent transactions to NHB on a quarterly basis. Individual details of fraudulent home loan borrowers are then shared among all the HFCs along with the modus operandi and causative factors involved. It is expected that the caution list would help in instituting checks and balances among the various lending institutions, the larger objective being to prevent occurrence/ recurrence of frauds in the housing sector. In the year 2013-14, 4 caution advices were issued by NHB totalling 149 number of fraudulent transactions. Further, through its Miscellaneous Circular, the Bank has also suggested HFCs to ensure that the documents are not given directly to the customers for verification, etc. to obviate any frauds, due to large number of frauds have been committed in borrowal accounts, where the documents were handed over to borrowers for verification.

III.5.e. Co-ordination with Other Regulatory Authorities

NHB continued the process of co-ordination with other Regulatory Authorities through State Level Co-ordination Committee (SLCC) meetings convened by the Reserve Bank of India, the Police Department, officials of the State Government in Ministries/ Department of Home, Finance, Law, Economic Offences Wing, Registrar of Companies, Company Law Board, Securities and Exchange Board of India, Institute of Chartered Accountants of India at State/Regional levels, etc. During the year 2013-14, NHB organised a comprehensive Workshop/Seminar for Auditors to sensitize and apprise them about the Role of National Housing Bank and statutory provisions and regulatory framework relating to HFCs in co- ordination with the ICAI in the states of Madhya Pradesh and Kerala. NHB also participated in the State Level Co-ordination Committee meetings convened by the Regional Offices of RBI for the states of Tamil Nadu, Rajasthan, Assam, Delhi, Haryana, Bihar, Himachal Pradesh, Maharashtra & Goa, Uttar Pradesh, Uttarakhand, Karnataka, Kerala, West Bengal, Andhra Pradesh, Jharkhand, Jammu & Kashmir, Madhya Pradesh, Gujarat, Orissa, Punjab & U.T. Chandigarh etc.

III.5.f. Other activities

(a) Interactive Meeting of the Principal Officers of registered HFCs regarding compliance with Prevention of Money Laundering Act, 2002, and Guidelines on KYC and AML measures for HFCs : Inter-Face Meeting of Financial Intelligence Unit- India with HFCs' Principal Officers – HFCs have certain

177 ANNUAL REPORT 2013-14

obligations under the Prevention of Money Laundering Act, 2002 (PMLA) including reporting of large cash and suspicious transactions to FIU-IND as Cash Transaction Report (CTR) and Suspicious Transaction Report (STR).

To sensitize the registered HFCs regarding the development in PMLA and to review their compliances on Know Your Customer Guidelines/Anti Money Laundering Measures, the Bank organized interface session for the Principal Officers of Registered HFCs at Delhi on January 7, 2014.

An interactive workshop/meeting for Principal Officers of HFCs was also organized in Chennai to discuss the development in PMLA and to review their compliances on Know Your Customer Guidelines/Anti Money Laundering Measures at Bank's Chennai Regional Representative Office on June 26, 2014. 8 HFCs were participated in interactive workshop/meeting, which was presided by Shri V. Rajan, General Manager, NHB.

III.6 PROMOTION AND DEVELOPMENT

Participation in various Government Programmes

III.6.a. Interest Subsidy Scheme for Housing the Urban Poor (ISHUP)

To improve the affordability of housing loans by EWS/LIG segments in urban areas, MoHUPA, Government of India, introduced ISHUP Scheme in December 26, 2008. Under the Scheme, an interest subsidy of 5 percent per annum for whole duration of the loan (15-20 years) is provided on loans up to` 1 lakh extended to EWS/LIG beneficiaries by PLIs. This interest subsidy is provided on NPV and upfront basis. The Scheme is being implemented through Primary Lending Institutions viz. Banks and select HFCs. The Scheme envisages the appointment of State Level Nodal Agencies (SLNA) by various States to facilitate the identification and selection of eligible beneficiaries for its effective implementation.

The Central Nodal Agencies (CNA) for the scheme were National Housing Bank (NHB) and Housing & Urban Development Corporation Ltd. (HUDCO). The scheme has closed w.e.f. September 30, 2013.

Progress made under ISHUP through NHB, as Central Nodal Agency

Till June 30, 2014, NHB as nodal agency, has disbursed NPV of subsidy amounting to` 8.67crore covering 9,534 beneficiaries under the Scheme. The status of subsidy disbursed by NHB under ISHUP during the period 2009-14 is as follows:

178 ANNUAL REPORT 2013-14

Table 19: Progress made under ISHUP through NHB (` in crore)

Year Total 2009-10 2010-11 2011-12 2012-13 2013-14 Amt. of Subsidy 0.37 3.41 2.89 1.18 0.82 8.67 disbursed No. of Beneficiaries 531 4611 2987 755 650 9534

III.6.b. 1% Interest Subvention Scheme

The Scheme of 1% Interest Subvention commenced on October 01, 2009. Under the Scheme, an interest subvention of 1% was provided on all individual housing loans of upto` 10 lakh, provided the cost of the unit does not exceed` 20 lakh. From the FY 2011-12, the Scheme was extended for housing loans upto` 15 lakh, where the cost of house does not exceed` 25 lakh. NHB was the sole nodal agency for the Scheme. The Scheme was in operation for a period starting from 1st October, 2009 to 31st March, 2013. The performance of the Scheme during the last three years is as shown in Table 20.

Table 20: Performance under 1% Interest Subvention Scheme

(` in crore) 1% Interest Subvention Scheme Year Banks HFCs Total 2010-11 21.22 17.32 38.54 2011-12 170.14 129.86 300 2012-13 333.02 103.57 436.59

III.6.c. Rajiv Rinn Yojana

The Ministry of Housing and Urban Poverty Alleviation (MoHUPA), Government of India, revised Interest Subsidy Scheme and renamed it as Rajiv Rinn Yojana (RRY), as an additional instrument for addressing the housing needs of EWS/LIG segments in urban areas with increase in limit of eligible housing loans from`` 1 lakh to 5 lakh. Rajiv Rinn Yojana is effective from October 1, 2013.

Under RRY, the amount of loan has been revised up to` 5 lakh for EWS and` 8 lakh for LIG beneficiaries. However, the interest subsidy is made available for a maximum` 5 lakh for both categories of beneficiaries. The eligible lending institutions under the scheme are SCBs, HFCs and RRBs. NHB and HUDCO are the 2 nodal agencies under the scheme. An Interest Subsidy of 5% (500 bps) will be provided

179 ANNUAL REPORT 2013-14

to the eligible borrowers availing housing loans from the financial institutions, on quarterly basis for the loan tenure of 15-20 years. Income of the borrowers will be certified by State Level Nodal Agencies as per the guidelines of MoHUPA. Under RRY, 7 MOUs have been signed by Primary lending Institutions (PLIs) with NHB which is one of the nodal agency for implementation of the Scheme.

III.6.d. NHB-RESIDEX-The Residential Property Price Index

Keeping in view the prominence of housing and real estate as a major area for creation of both — physical and financial assets and its contribution in overall national wealth, a need was felt for setting up of a The latest RESIDEX for April- mechanism, which could track the movement of prices in the residential June, 2014 constructed for 26 housing segment. National Housing Bank, at the behest of the Ministry cities, has taken into account of Finance, undertook a pilot study to examine the feasibility of the price trends for residential preparing such an index at the national level. The pilot study covered 5 properties in different locations and zones in each city and is cities viz. Bangalore, Bhopal, Delhi, Kolkata and Mumbai for which based upon the transaction data index was constructed till the period 2005 taking 2001 as the Base Year. received from CERSAI Based on the results of the pilot study and recommendations of the Technical Advisory Group (TAG), NHB launched RESIDEX for tracking prices of residential properties in India, in July 2007.

The Index helps the general consumers and property buyers and borrowers in their decision-making by enabling comparisons over time and across cities and localities-based on the emerging trends. The RESIDEX also provides insights into the property market for the lending agencies in their credit evaluation and assessment of the value (present and potential) of the security against the loan. NHB RESIDEX can be a useful indicator for estimating the value of property to be financed and also for assessing the value of security cover on the outstanding loan. Builders and developers may also benefit from the index by assessing the demand scenario in a locality, and mapping the housing needs in different parts of the country. NHB RESIDEX may be useful to policy makers, banks, housing finance companies, builders, developers, investors and individuals.NHB RESIDEX is being well-received from all the corners of the industry e.g. banks, HFCs, Builders & Developers and Government of India.

NHB RESIDEX tracks the movement in prices of residential properties on a quarterly basis. This is being done since 2007. The latest NHB RESIDEX for the quarter April-June, 2014 covers 26 cities.

The RESIDEX for the quarter April-June, 2014 constructed for 26 cities has taken into account the price trends for residential properties in different locations and zones in each city and is based upon the transaction data received from Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI). The data-based on actual transactions are put through a Model that depicts the trend in

180 ANNUAL REPORT 2013-14 the market. The RESIDEX is expected to bring greater uniformity and standardisation as well as greater transparency in the valuation of properties across the industry.

NHB regularly conducts Nodal officers meet to sensitize the Banks and HFC's about the RESIDEX and improve upon the RESIDEX-based on their inputs. NHB also promptly gives press releases and updates the website on quarterly basis.

Price Movement for the quarter April-June, 2014 (26 Cities)

The movement in prices of residential properties for the quarter April- June, 2014 has shown marginal increasing trend in eighteen (18) cities ranging from 0.5% in Bhubaneswar to 3.9% in Pune, and fall in six (6) cities ranging from -0.5% in Lucknow to -4.4% in Chandigarh in comparison to the previous quarter January-March, 2014. Indices for 2 cities namely Hyderabad and Raipur have remained stagnant.

Rising Trend: Residential housing prices in 18 cities have shown increase in prices in this quarter ended June, 2014 (April-June, 2014) over the previous quarter ended March, 2014 (January-March, 2014). Maximum increase was observed in Pune (3.9%) followed by Coimbatore (3.5%), Indore (3.3%), Guwahati (3.2%), Patna (2.7%), Kolkata (2.4%), Ahmedabad (1.91%), Vijayawada (1.88%), Mumbai (1.75%), Chennai (1.72%), Ludhiana (1.4%), Bhopal (1.3%), Kochi (1.2%), Jaipur (0.99%), Faridabad (0.96%), Bengaluru (0.93%), Nagpur (0.6%) and Bhubaneswar (0.5%).

Declining Trend: 6 cities have shown decline in prices over the previous quarter with maximum fall observed in Chandigarh (-4.4%) followed by Meerut (-3.6%), Delhi (-3.0%), Surat (-2.4%), Dehradun (- 2.1%), and Lucknow (-0.5%).

Indices for 2 cities namely Hyderabad and Raipur have remained stagnant.

181 ANNUAL REPORT 2013-14

Table 21: City Wise Housing Price Index for the Quarter April-June, 2014

Jan - Apr- Jul- Oct- Jan - Apr- July- Oct- Jan - April- Mar Jun Sep Dec Mar Jun Sep Dec March June 2007 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 CITIES Index Index Index Index Index Index Index Index Index Index Index

Hyderabad 100 86 85 84 90 88 84 88 93 95 95

Faridabad 100 217 217 216 205 207 202 204 209 209 211

Patna 100 129 140 138 151 152 147 150 159 150 154

Ahmedabad 100 164 174 180 191 192 186 191 197 209 213

Chennai 100 304 309 312 314 310 303 318 330 349 355

Jaipur 100 80 78 85 87 112 110 108 105 101 102

Lucknow 100 164 171 175 189 183 187 191 185 194 193

Pune 100 181 200 201 205 221 219 219 235 232 241

Surat 100 144 145 138 150 140 142 145 154 165 161

Kochi 100 72 73 80 87 89 86 86 85 85 86

Bhopal 100 204 207 206 216 230 227 220 223 226 229

Kolkata 100 191 196 191 209 197 189 199 196 206 211

Mumbai 100 190 197 198 217 222 221 222 222 229 233

Bengaluru 100 92 100 98 106 109 108 107 111 107 108

Delhi 100 168 172 178 195 202 199 190 196 199 193

Bhubaneshwar 100 161 164 168 172 197 195 193 202 195 196

Guwahati 100 157 159 158 166 153 147 149 160 154 159

Ludhiana 100 163 171 168 179 167 157 150 150 145 147

Vijayawada 100 184 186 181 185 184 174 167 161 160 163

Indore 100 208 203 196 194 195 184 180 184 181 187

194 191 192 188 183 175 Chandigarh 100

Coimbatore 100 184 178 178 173 170 176

Dehradun 100 183 184 184 186 191 187

Meerut 100 191 189 176 171 165 159

Nagpur 100 163 168 162 175 180 181

Raipur 100 156 155 157 159 166 166

182 ANNUAL REPORT 2013-14

III.6.e. Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH)

In pursuance of the Budget announcements in FY 2010-11 and 2011-12, the Ministry of Housing and Urban Poverty Alleviation (MoHUPA), Government of India has set up and registered Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) on May 01, 2012 and the same has also been notified by MoHUPA, GoI vide Gazette Notification dated July 7-13, 2012. The Trust has been set up with an objective to ensure better flow of institutional credit for housing in urban areas to cater to the needs of the targeted segments (EWS/LIG borrowers). Till June 30, 2014, 47 The Trust has an initial Corpus Fund of` 1 lakh contributed by the institutions have signed MoU with the CRGFTLIH Settler. Further contribution will be made to the initial corpus by the and the Trust has issued Settler and the State Governments, who draw on it in accordance with ` guarantee cover in respect of slum population, i.e. 1000.00 crore in the aggregate by the Settler and ` 116 loan accounts of 4 200 crore by the State Governments. As on date MoHUPA, GoI as ` Member Lending Institutions settler, has contributed 150 crore towards the corpus fund of the (MLIs) Trust.

CRGFTLIH provides guarantee for housing loan upto` 5 lakh sanctioned and disbursed by the lending institutions without any collateral security and/or third party guarantee to the new borrowers in the EWS/LIG categories in urban areas for home improvement/acquisition and purchase of new or second hand dwelling unit/construction/extension of an affordable dwelling unit with carpet area not exceeding 430 sq.ft.(40 sq.m.). The guarantee cover available under the scheme is to the extent of 90% of the sanctioned housing loan amount upto` 2 lakh and 85% for loan amounts above`` 2 lakh and upto 5 lakh. The lending institutions eligible to avail benefit of the guarantee cover under the scheme of the Fund Trust are Scheduled Commercial Banks, Regional Rural Banks, Urban Co-operative Banks, NBFC-MFIs, Apex Co-operative Housing Finance Societies registered under the State Co-operative Societies Act and Housing Finance Institutions registered with NHB.

Till June 30, 2014, 47 institutions have signed MoU with the Trust under the scheme. During the period, the Trust has issued guarantee cover in respect of 116 loan accounts of 4 Member Lending Institutions (MLIs) involving a total loan amount of` 3.28 crore provided to EWS/LIG households. These MLIs are Canara Bank, Oriental Bank of Commerce, Syndicate Bank and GRUH Home Finance Ltd. The state wise and income group wise bifurcation of EWS/LIG loan accounts against which the Trust has issued the Guarantee cover to MLIs is shown in Table 22:

183 ANNUAL REPORT 2013-14

Table 22: Details of Guarantee issued under CRGFTLIH

Sr. No. Name of State Category of Borrowers Total No. of EWS LIG Borrowers Covered 1. Jharkhand 0 1 1 2. Telangana 1 0 1 3. Kerala 2 6 8 4. Puducherry 1 0 1 5. Tamilnadu 0 2 2 6. West Bengal 0 1 1 7. Gujarat 1 47 48 8. Uttar Pradesh 2 2 4 9. Madhya Pradesh 17 8 10. Haryana 1 2 3 11. Karnataka 26 2 28 12. Rajasthan 0 3 3 13. Maharashtra 1 7 8 Total 36 80 116

III.6.f. Capital Subsidy Scheme for Installation of Solar Water Heating and Solar Lighting Systems in Homes

With a view to promote the use of solar energy in the domestic context, the Ministry of New and Renewable Energy (MNRE), Government of India, is implementing a capital subsidy scheme under its Jawaharlal Nehru National Solar Mission (JNNSM). The Scheme aims at The National Housing Bank has popularizing the use of solar water heating and solar lighting systems in been designated as a nodal agency homes by offering suitable incentives in the form of capital subsidies for for administering and monitoring the Capital Subsidy purchase and installation of the solar systems. The National Housing Scheme Bank has been designated as a nodal agency for administering and monitoring the capital subsidy scheme.

The Scheme has commenced from April 01, 2014 and loans disbursed on or after April 01, 2014 are eligible to be covered under the Scheme. The Scheme will be valid till December 31, 2015, or such extended period as may be allowed by the Government of India.

The subsidy component is limited to 30% of the benchmark cost in case of solar water heating systems [subject to max. of 500 lpd per house]. In case of solar home lighting system, it is limited to 40% of the benchmark cost for units up to 300 watts capacity and 30% of the benchmark costs for units above 300 watts to 1000 watts. The benchmark cost is prescribed by MNRE from time to time.

The institutions eligible to participate in the Scheme include HFCs, SCBs, RRBs, Scheduled Urban Co-operative Banks (UCBs), Apex

184 ANNUAL REPORT 2013-14

Co-operative Housing Finance Societies (ACHFs) and Agricultural and Rural Development Banks (ARDBs).

III.6.g. Golden Jubilee Rural Housing Finance Scheme (GJRHFS)

GJRHFS has been conceptualized to address the problem of rural housing through improved access to housing credit which would enable an individual to build a modest new house or to improve or add to his old dwelling in rural areas. The progress under the Scheme is monitored by NHB and is reported to the GoI on quarterly basis. GJRHFS is the principal instrument of NHB for financing for rural housing. The performance of Banks and HFCs is a regular Agenda Item in the Meeting of the CEOs of HFCs, Banks and select RRBs conducted by NHB on a half yearly basis. Since its inception in 1997, it has been successful in its endeavor as vindicated by the fact that over 4.2 million units have been financed. The annual targets under the Scheme (in terms of number of units financed) are set by NHB and further NHB monitors its implementation. The targets under the Scheme have been increased in a phased manner from 50,000 units in 1997-1998 to 3, 75,000 units in 2011-2012 and to 4,50,000 units in 2013-14.

Performance (FY 2013-14): The total achievement for the year 2013-14 (1st April 2013 – 31st March 2014) is given below. For the year 2013-14, HFCs have achieved 90.23 % of their allocated target and the PSBs have achieved 82.05 % of their allocated target. The overall achievement has been 85.32%.

Table 23: Performance under GJRHFS for the year 2013-14

Institution April 2013 – March 2014 Percentage Achievement Target Achievement vis-à-vis target No. of units No. of units

HFCs 180000 162425 90.23

PSBs 270000 221546 82.05

Total 450000 383971 85.32

Cumulative performance: During the period 1997-2014, a total of 42,93,457dwelling units have been financed as against the target of 45,80,000 dwelling units indicating achievement of around 93.74 percent over the period. The progress under the scheme over the years is shown in Table 24.

185 ()

ANNUAL REPORT 2013-14

Table 24: Cumulative performance under GJRHFS since inception (No. of Units)

Year Target Achievement Percentage Amount disbursed Achievement (` in crore) (%) 1997-1998 50,000 51,272 102.54 N.A. 1998-1999 1,00,000 1,25,731 125.73 N.A. 1999-2000 1,25,000 1,41,363 113.09 N.A. 2000-2001 1,50,000 1,58,426 105.62 N.A. 2001-2002 1,75,000 1,87,268 107.01 3,246.03 2002-2003 2,25,000 1,78,200 79.20 3,816.34 2003-2004 2,50,000 2,43,753 97.50 6,353.82 2004-2005 2,50,000 2,58,562 103.42 6,440.95 2005-2006 2,75,000 2,98,651 108.60 8,367.86 2006-2007 3,30,000 2,98,426 90.43 7,664.58 2007-2008 3,50,000 2,71, 537 77.58 8,844.81 2008-2009 3,50,000 2,58,265 73.79 10,337.88 2009-2010 3,50,000 3,87,792 110.80 15,565.24 2010-2011 3,75,000 2,93,721 78.33 14,781.18 2011-2012 3,75,000 3,37,623 90.03 17,226.91 2012-2013 4,00,000 4,18,896 104.72 24422.68 2013-2014 4,50,000 3,83,971 85.32 18,867.88 Total 45,80,000 42,93,457 93.74

G .12 Cumulative performance under GJRHFS since inception 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000

Number of Units 100,000 50,000 0

2013-14 2005-2006 2007-20082008-20092009-20102010-2011 1997-19981998-19991999-20002000-20012001-20022002-20032003-20042004-2005 2006-2007 2011-20122012-2013

Target Achievement

186 ANNUAL REPORT 2013-14

III.6.h RML and RMLA

NHB continues with its endeavors to promote the Reverse Mortgage Loan (RML) and Reverse Mortgage Loan Annuity (RMLA) NHB opened two new RML programme by way of counseling programs and seminars for elderly centres at Nagpur and citizens of the country to generate awareness amongst them to enable Bhubaneswar during the year them to take informed decision for availing this product. During 2013-14 2013-14, NHB organized and conducted 5 seminars besides participation in 1 workshop for the senior citizens in various cities of India. Till date, NHB has opened fifteen RML Counseling centers, two of which were opened during the year 2013-14. These counseling centers are at Ahmedabad, Bengaluru, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi (2), Hyderabad, Kolkata, Lucknow, Mumbai, Nagpur, Pune and Patna. These centers are being run by NHB in association with eminent Non-Government Organizations (NGO's) working for the elderly. NHB has also been working towards building the capacities in the commercial banks and HFCs for implementing the product by way of its training programmes and seminars for the personnel of these institutions. NHB has been carrying on with its advocacy on RML Counseling Programme various issues concerning implementation of the marking the inauguration of RML RML/RMLA. Significant among them was the issue relating to tax Counseling Centre at Nagpur held on exemption of the payment received under RMLA by the senior citizen June 19, 2014 borrowers. The Government of India have vide Notification No.79/2013/F.No.149/54/2013-TPL dated October 07, 2013 amended the Reverse Mortgage Scheme, 2008 to include RMLA in the Reverse Mortgage (Amendment) Scheme, 2013, eligible for tax exemption.

III.6.i Residential Mortgage Backed Securitization

NHB has so far completed fourteen residential mortgage backed securitization transactions involving 38,809 individual housing loans of six Housing Finance Companies (HFCs) and one Scheduled Commercial Bank amounting to` 862.20 crore. The success of the issues of RMBS has significantly provided means to better understand and address the various legal, regulatory, fiscal, accounting and other capital market RML Counseling Programme related issues relating to such transactions as also various policy issues marking the inauguration of RML for a conducive environment for such issuances. The structure of Counseling Centre at Bhubaneswar held on June 25, 2014 NHB's RMBS issues has been designed under the provisions of the National Housing Bank Act, 1987 (Sections 14 (ea), 14 (eb) and 14 (ec)), which authorize the Bank to carry out securitisation transactions and

187 ANNUAL REPORT 2013-14

issue mortgage backed securities as trust certificates of beneficial interest and act as Trustee for the holders of such securities.

Performance of the Pools of Housing loans Securitize

NHB has appointed the respective originators as Servicing and Paying Agents (S &P Agents) to ensure that collections in respect of each of the pool of securitized loans are distributed to the respective PTC holders and Service providers. The yields to Class A PTC holders have been consistent with that indicated at the time of issuances.

Redemption of RMBS pools

During the financial year 2013-14, 4 residential mortgage backed securitisation transactions of about` 143 crore were fully redeemed and the Special Purpose Vehicle Trust(s) successfully closed. Consequently, as of March 31, 2014 no RMBS transaction was outstanding.

III.6.j Equity Participation

In terms of the mandate given to NHB towards promotion and development of the housing finance system in the country, NHB has been participating in the equity share capital of start-up companies/ new institutions. In this connection, NHB has made the investments by way of acquiring equity stake in the following entities:

§ Cent Bank Home Finance Limited; § Mahindra Rural Housing Finance Limited; § Central Registration of Securitization Asset Reconstruction and Security Interest of India; § India Mortgage Guarantee Corporation Pvt. Limited

Brief details of the said companies and the equity stake of NHB is described herein below.

Cent Bank Home Finance Limited

Cent Bank Home Finance Limited (CBHFL) is a Housing Finance Company registered with NHB. It is a subsidiary of Central Bank of India. NHB has a 16 percent stake in the CBHFL since 1991. The total investment made by NHB in the equity share capital of CBHFL till date is ` 13.25 crore. CBHFL is in the business of extending housing loans in India.

Mahindra Rural Housing Finance Limited

Mahindra Rural Housing Finance Limited (MRHFL) is a Housing Finance Company registered with NHB. It is a subsidiary of Mahindra & Mahindra Financial Services Limited. NHB has a 12.50 percent stake in

188 ANNUAL REPORT 2013-14

MRHFL since 2008. The total investment made by NHB in the equity share capital of MRHFL is` 15.19 crore. MRHFL is in the business of extending housing loans in India.

Central Registration of Securitization Asset Reconstruction and Security Interest of India (CERSAI)

Central Registration of Securitization Asset Reconstruction and Security Interest of India (CERSAI) is a company licensed under Section 25 of the Companies Act. The object of the CERSAI is to maintain and operate a registration system for the purpose of registration of transactions of securitization, asset reconstruction of financial assets and creation of security interest over property, as contemplated under Chapter IV of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). NHB has a 5 percent stake in CERSAI since 2012. The total investment made by NHB in the equity share capital of CERSAI is` 0.25 crore

India Mortgage Guarantee Corporation Pvt. Ltd. (IMGC)

NHB, Genworth, Asian Development Bank (ADB) and International Finance Corporation have together set up India's maiden Mortgage Guarantee Company - India Mortgage Guarantee Corporation Pvt. Ltd. (IMGC). NHB is the majority stakeholder in IMGC with a shareholding of 38 percent, Genworth has a stake of 36 percent, and while ADB and IFC have a 13 percent stake each in the company. During the year, IMGC successfully closed its first mortgage guarantee contract in the Indian mortgage market. The transaction offered a first loss guarantee on a pool of priority sector housing loans securitized by Dewan Housing Finance Corporation Limited, an HFC registered with NHB.

IMGC will improve opportunities for home ownership in the country by making home loans more accessible to a larger segment of the population. The lending institutions (banks and HFCs) having taken guarantee cover from IMGC will benefit from capital relief against such guaranteed loans through lower risk weights. Mortgage Guarantee (MG) enables expansion in the housing finance sector coupled with stability as it involves commercial and supervisory oversight by the Mortgage Guarantee Company, as well as its regulator. IMGC is also expected to provide impetus to residential mortgage-backed securitization and the growth of secondary mortgage market with credit enhancement support that the guarantee will provide resulting in higher protection to investors in residential mortgage-backed securities issued against such loans

189 ANNUAL REPORT 2013-14

III.7 INFORMATION TECHNOLOGY

The IT Department of the Bank is continuously thriving to match the changing environment in the field of Information and Technology. The Department has implemented various new projects during the year and also has taken various new initiatives to catch up with the changing dynamics.

III.7.a. Major Activities and Projects

Maintenance of Portals

The Bank maintains its website at http://www.nhb.org.in which provides information about the Bank and its core and corporate functions. The Bank has also developed a knowledge sharing and information portal for Asia Pacific Union for Housing Finance (APUHF) which is available at http://www.apuhf.info.

Projects

Implementation of Video Conferencing

Bank had implemented Video-conferencing (VC) set-up for its Head Office, Mumbai Regional Office and at six RROs. The Bank is in process of upgrading its existing VC infrastructure through open tendering process in which M/s Unify has been selected for VC Upgradation. Following add-on facilities have been envisaged with the upgradation in VC services:

1. Content management of VC 2. Recording of VC Sessions 3. Streaming of the VC sessions

The project is expected to be completed by October 2014.

Procurement of Back-up Solution for the Bank

Bank has setup Data Centre for providing various IT services to Bank officers. The services include SAP, e-mail and file servers enabling transfer of data from one end to another. The back-up of data is taken to ensure services are restored in case of any exigency. With the upgradation of technology and increase in storage space utilized by various applications, Bank had segregated the storage and processing area by implementing Storage Area Network (SAN) thereby shifting the backup process from its LAN to SAN for optimum utilization of the network for processing.

190 ANNUAL REPORT 2013-14

Bank has installed Backup Server along with the Tape Drive at Delhi and Mumbai Site. The backup testing for critical application/ File- Server Sync have also been tested and found to be working satisfactorily.

III.7.b. New Initiatives

Data Centre Renovation and Shifting

Bank has its Data Center (DC) at Head office, New Delhi and Disaster Recovery (DR) Site at Mumbai Regional Office (MRO). The DC is equipped with various sensitive equipment like server, network devices etc. and provide critical services like SAP, corporate e-mail services, file server etc. The DC is also equipped with two Precision Air Conditioners (PAC) units and two UPS units, which provide cooling and power for smooth functioning of these equipment. The existing DC of the Bank was renovated in June 2008. Bank has initiated plan for replacement of old hardware units with buy back option and related civil/electrical enhancements. The new data center during building renovation is planned to be designed-based on the state of the art technology with advance security and infrastructure setup recommended for the data center.

Accessing SAP through Internet

Bank has made its SAP ESS portal online to enable all employees of the Bank to access SAP ESS system through internet, thus helping employees to access portal services viz. reimbursement, tour/travel requests & leave applications through internet. This has helped in better managing the aforesaid services as also to bring efficiency in HR services.

Implementation of Two Factor Authentication

Bank has provided access to various services viz. SAP, Exchange, File Servers to its officers internally through LAN. Further, Exchange and ESS Portal is also available to the officers over internet. Presently, Bank has only one level of authentication mechanism i.e. user ID and password to access these applications on LAN. Bank has now implemented two factor authentication system, to provide an additional level of authentication (in addition to User ID & password) for secured access. The two factor authentication has been implemented by way of token (hardware form) as well as soft form (mobile app) which generates random number. This random number is required to be entered along with user ID and password for accessing various IT services, thus making the services more secure.

191 ANNUAL REPORT 2013-14

III.7.c IT Committee

To provide focused attention on IT security issues, the Information Technology Policy (ITP) has prescribed formulation and adoption of a detailed and comprehensive Information Security Policy (ISP). The Information Security Policy (ISP) is implemented and maintained through a specific structure which is called Information Security Organization (ISO). The first component of the ISO is the Information Security Committee (ISC) which is an integral part of Information Technology Committee (ITC). The ITC is headed by the Executive Director of the Bank. It has nominated heads of departments, including the head of IT Department, as its members. The ITC also has nominated external IT Security experts, senior IT security functionaries in other organizations into the committee. The ITC undertakes following: § Review and approve functional Information Security Policy (ISP) and define responsibilities of various functionaries; § Monitor significant changes in the exposure of information assets to various threats; § Identify, classify and periodically review the criticality and confidentiality requirements of all types of information resources; § Ensure that information security issues are appropriately addressed in the Business Plan; § Monitor and review the security incidents; § Approve major initiatives to enhance the information security.

III.8 HUMAN RESOURCES

The Bank's human resources policy is aimed at recruitment and retention of skilled, well balanced and motivated employees. The Bank is committed to the continued development of employees through on- the-job training and participation in in-house as well as external training courses and conferences and seminars.

III.8.a Recruitment, Promotions and Retirement/Resignations

§ Recruitment: Bank has taken up recruitment of officers at different levels through direct recruitment process as per the requirements. During the year, 18 officers have been recruited in Assistant Manager level. § Promotion: Promotional exercises have been carried out four times during the year and officers were promoted from Scale VI to Scale VII, Scale V to Scale VI, Scale IV to Scale V, Scale II to Scale III and Scale I to Scale II. In total 21 officers were promoted to the next higher scales during the year.

192 ANNUAL REPORT 2013-14

§ Transfer: During the year, 43 officers were transferred/given additional charges in the Bank (both interdepartmental transfers as well as transfer from HO to RO and vice versa.)

III.8.b. Training and Development

To upgrade their skills and enhance their proficiency, NHB deputed its officers for various training and management development programmes besides organizing in-house programmes. The officers were nominated to programmes at National and International level Institutes such as CAB, NIBM, IPA, FIMDA etc. During the year 2013- 14, 52 officers had undergone domestic training programmes and 37 officers had attended conferences, summits, workshops and meetings. In addition to above, the Bank has deputed 16 officers for exposure to various International programmes at Germany, USA, Singapore, Russia etc.

III.8.c. Schemes & Policies introduced/ revised during the year

During the year, a number of employee benefit schemes like housing loan scheme for the officers of NHB, clean loan scheme, medical scheme for Bank's retired employees, scheme for CISA certification etc. were either revised or newly introduced.

III.9 RISK MANAGEMENT AND INTERNAL CONTROLS

In the course of the business operations, the Bank is exposed to a number of risks, which are:

§ Credit risk - the risk arises when borrowers will fail to discharge their repayment obligations and thereby cause a financial loss. § Liquidity risk - the risk arises if the Bank us the we will be unable to meet net funding requirements. This may be caused by market disruptions or downgrading of credit ratings, which may cause certain sources of funding to become unavailable. § Interest rate risk - the risk arising from re-pricing and/ or maturity mismatches between the assets and liabilities, thus impairing our net interest income. § Operating and other risks - the risk of loss arising from inadequate or failed internal processes, people, systems and/ or from external events, including legal risk.

To mitigate and monitor the above risks, the Bank has its Risk Management System in place. For this purpose the Bank has constituted the following Committees:

193 ANNUAL REPORT 2013-14

§ Asset Liability Management Committee (ALCO) which monitors the management of market risk of the Bank. § Credit Risk Management Committee (CRMC) which monitors the credit risk of the Bank. § Operational Risk Management Committee (ORMC) which monitors the operation risk of the Bank. The Bank has a Board appointed Risk Management Advisory Committee (RMAC) with three external members who are experts in matters concerning Banking and Finance. During the year 2012-13, the Committee met four times to review the Bank's risk management policies and functions in relation to the three areas of risk mentioned above.

The revised Internal Credit Rating Model of the Bank, developed by CRISIL Risk and Infrastructure Solutions Ltd, was approved by the Board in its 112th meeting held on May 12, 2014. The revised model is applicable for the following PLI categories that are availing/seeking refinance facility from NHB: § Scheduled Commercial Banks § Housing Finance Companies § Regional Rural Banks § Urban Co-operative Bank

III.10 RAJBHASHA

National Housing Bank is committed towards the successful and effective implementation of Official Language Policy of the Government of India and has taken relevant and effective measures for the progressive use of Hindi language in the Bank.

Bank complies with the provisions relating to issuing replies in Hindi for the Hindi/bi-lingual letters received from Government of India, issuance of bi-lingual documents under Section 3(3) of Official Language Act, publishing reports and Bank's publications in bi-lingual form etc. Workshops are also organized regularly in the Bank to enhance the usage of Hindi. 'Aaj Ka Shabd' (Today's word) is written in Hindi/English at the Notice Board of the Bank which is also sent through Internal e-mail to all the Officers of the Bank. Following initiatives were taken by the Bank during the year:

§ With a view of promoting Hindi, Bank organizes a Hindi competition bi-monthly. Each time, a new topic is given for competition and three participants are declared as winners. During the year, 15 officers of the bank were given the prize.

194 ANNUAL REPORT 2013-14

§ To encourage the use of Hindi in official work, various encouragement plans have been introduced by the Bank. An honorarium amount is given to officers who write articles for in house Hindi magazine 'Awas Bharti'. During the year, the amount of honorarium has been increased from` 1000/ - to ` 2000/- § Every year two officers of the bank are awarded with 1st and 2nd prize for maximum use of Hindi in official work. § Official Language Implementation Committee meetings were held regularly on quarterly basis. The meetings were presided by the Executive Director. Progressive use of the official language in the Bank's Head Office along with the Regional Office at Mumbai and in all other representative offices is monitored in the meeting. Decisions taken are informed to all the Departments/ Officers for ensuring compliance. § The website of the Bank has been provided with the Unicode Font as per the Directions of the Official Language Department of the Ministry of Home Affairs, Government of India. Delhi Nagar Rajbhasha Karyanvyan Samiti has started a website with the help of all member Banks. This website contains a web page mentioning all the functions of National Housing Bank. § The write-ups of Bank's officers are also published in the Hindi magazine namely, "Bank Bharti" published by the Delhi Nagar Rajbhasha Karyanvyan Samiti. § 'Hindi Chetna Maas' is organized every year to enhance the use of Hindi in Bank's day-to-day work. Seven Competitions were organized during the 'Hindi Chetna Maas' conducted from 15 August to 14 September, 2013 which saw large participation of the officers. A Hindi documentary was also been shown during the 'Chetna Maas' emphasizing the importance of pronunciation in any language. § The Rajbhasha Department of the Bank organized competition of Hindi Translation on 26 March, 2014 under the aegis of Delhi Bank, TOLIC. The competitors of all the Banks participated in this competition. Two officers of the Bank have got consolation prize in this competition. § In the second half of the Silver Jubilee Year, the Bank published a Silver Jubilee Special Edition of Bank's in-house magazine 'Awas Bharti'. The articles called from various Banks at all India level, including the messages of the honorable Ministers of Govt. of India had been published in this special edition. § The Rajbhasha Department of the Bank has planned to organize an All India Conference of Official Language 2014. In this conference, the officers from the Rajbhasha Unit of Department

195 ANNUAL REPORT 2013-14

of Financial Services, Ministry of Finance and Rajbhasha Department of Ministry of Home Affairs will be invited along with the representatives of all the Banks and Financial Institutions. There is a plan to publish and release the Special Edition of Rajbhasha Conference of bank's in-house magazine 'Awas Bharti' on this occasion.

III.11 KNOWLEDGE CENTER

Knowledge Centre was established in Head Office to facilitate acquiring additional knowledge and application through effective dissemination of information. Since the inception of Knowledge Centre in 1989 it has seen many changes, it has transformed itself from manually managed to fully automated library through library automation software LIBSYS. Knowledge Centre has a unique collection of more than 5600 Books and 54 reputed International and National Journals on subjects like Housing and Housing Finance, Economics, Fiction, General Management, Law, Leadership, Quantitative Methods, Rural Development, Micro finance etc in English and Hindi language. Along with above books, Knowledge Centre also has a collection of various reports and publications of reputed institutions such as RBI, International Monetary Fund, World Bank, IUHF. Knowledge Centre uses tools such as 22nd edition of Dewey decimal classification, Library of Congress subject heading list and Cutter's author table for classification of printed and non-printed material.

III.12 CORPORATE COMMUNICATION

Corporate Communication is the bridge between the Bank and its stakeholders. Apart from managing all internal and external communications, the Corporate Communication aims at increasing brand awareness and visibility of the Bank. The responsibilities of the Corporate Communication Cell include sponsorship of events, tie-up as knowledge partner(s) with other institutions, consistent interactions with electronic and print media, release of advertisements and press items to spread awareness regarding functions, activities and initiatives of the Bank.

The Bank intends to make people at grassroots aware of its initiatives and schemes. As such, advertisements have been released in regional/vernacular magazines/newspapers. The Bank has been featured in national and regional media, both electronic and print, from time to time for its activities and contributions in the housing finance sector.

Besides other activities, as a brand building exercise, the Bank sponsored Annual Conference - “Winter School 2013” organized by

196 ANNUAL REPORT 2013-14

Centre for Development Economics, Delhi School of Economics & Annual Conference of India Econometric Society both during December 2013. The Bank also supported NAREDCO for the Conference and property show in October, 2013 & Odisha state level Conference on "Housing for Masses" in February, 2014 & National Seminar on "Green Affordable Housing" in June, 2014 .The Bank was knowledge partner (Supporting Organization) for Conference on 'Mainstreaming Environmental Planning Considerations for Integrating Solar Energy Efficiency in Built Environment" , organized by Sharp Development during January, 2014 at School of Planning and Architecture at New Delhi. The Bank also Sponsored the 46th Annual Conference at Rimuli College, Odisha organized by Odisha Economic Association during February, 2014.

III.13 CAPACITY BUILDING

NHB regularly undertakes various measures towards training and capacity building of various stakeholders in the sector. This includes regular interaction with various PLIs in forums like the CEO meetings, Round Tables etc. apart from imparting and conducting various training programs.

The Bank organized 25 programmes during 2013-14 for the officers of Housing Finance Companies & Banks, Regional Rural Banks and Urban Co-operative Banks, which is the highest in any calendar year since its inception in 1988. A total of 797 participants from various PLIs participated in Bank's programmes. The places where the Training Programmes were organized were spread throughout the length and breadth of the country viz Ahmedabad, Aizwal, Akola, Bungluru, Bhubaneswar, Chennai, Gurgaon, Guwahati, Hyderabad (2 programmes), Indore, Kadapa, Lucknow, Madurai, Mumbai (2 programmes), Mysore, Nagpur, Neharlagun, Nellore, Puducherry, Raipur, Shillong, Udaipur and Warangal.

A dedicated programme for Women Executives was also held at Mumbai on 'Mortgage Finance for Homes'. The Bank is also conducting training programmes for RRBs and UCBs. To have maximum impact of the programme, participants of only one RRB are invited at a time. This also helps in discussing area/state specific issues. The initiative highlights the commitment of the Bank towards well being of the sector. Programmes for RRBs/UCBs in Hindi speaking areas were conducted in Rajbhasha. During the year, three training programmes were conducted in Rajbhasha. The feedback received from the participants has been very good and encouraging.

197 ANNUAL REPORT 2013-14

Table 25: NHB’s Training Calendar 2013-14

S.no Program Details Location Date No. of Participants

1. Orientation in Housing Finance Bangalore July 11-12, 2013 35

2. Rural Housing Finance Guwahati July 25-26, 2013 31

3. Rural Housing Finance Warangal August 5-6, 2013 32

4. Rural Housing Finance Hyderabad August 7-8, 2013 42

5. Retail Assets-NPA Management Hyderabad August 19-20, 2013 23 & Recoveries

6. Rural Housing Finance Indore August 26-27, 2013 41

7. Mortgage Finance for Homes Mumbai September 26-27, 2013 29 (for Women Executives)

8. Rural Housing Finance Akola October 7-8, 2013 35

9. Housing Finance for UCB's Nagpur October 9, 2013 20

10. Rural Housing Finance Udaipur October 24-25, 2013 29

11. Documentation for Housing Loans Chennai November 11-12, 2013 42

12. Rural Housing Finance Gurgoan November 19-20, 2013 28

13. Legal Issues in Housing Finance Puducherry December 28-29, 2013 38

14. Rural Housing Bank Madurai January 06-07, 2014 31 Pandyan Grama Bank

15. Prevention of Fraudulent Practices Shillong January 30-31, 2014 38 in Housing Finance

16. Rural Housing Bank Raipur February 06-07, 2014 25 Chattisgarh Rajya Gramin

17. RHF Odisha Gramya Bank Bhubaneswar February 20-21, 2014 24

18. Risk Management & Asset Ahmedabad February 27-28, 2014 31 Liability Management

19. RHF Andhra Pragathi Gramen Bank Kadapa April 10-11, 2014 35

20. RHF Andhra Pragathi Gramen Bank Nelore April 21-22, 2014 39

21. Regulatory Frame Work Lucknow May 08-10, 2014 38

22. RHF Mizoram Rural Bank Aizwal May 19-20, 2014 21

23. RHF Arunachal Rural Bank Neharlagun May 23-24, 2014 23

24. KYC-FPC and Customer Service Mysore June 5-6, 2014 35

25. Housing Finance for UCB's Mumbai June 20, 2014 32

Total Participants 797

198 ANNUAL REPORT 2013-14

NHB Training at Shillong on Prevention of NHB Training at Ahmedabad on Risk Management Fraudulent Practices in Housing Finance & Asset Liability Management

III.14 ROLE OF REGIONAL OFFICES (RO) AND REGIONAL REPRESENTATIVE OFFICES (RROs)

The RO and RROs play a very critical role in the execution of the Banks objectives. Some of the major activities conducted through these offices are:-

§ Generation of refinance and project finance proposals for the Bank. § Representation in the State Level Banker Committe (SLBC) meetings. § Participation in various meetings/seminars/symposia convened by IBA, RBI and other institutions and providing valuable inputs to HO on the outcome of these meetings. § The Mumbai Regional Office acts as a settlement office for all the major transactions of the bank on a day-to-day basis which necessitates effective co-ordination with various departments in HO as well as with other outside agencies. The Disaster Recovery Site of the Bank is located in the premises of the Mumbai Regional Office and has been functioning effectively. With the commissioning of the MPLS link, the operational efficiency has increased. DR Drills are regularly conducted for CBLO borrowings through CCIL. § RML Counselling Centre/Seminars are conducted through RO and RROs

III. 15 CORPORATE GOVERNANCE

Corporate governance is ensured by the Bank by adopting best practices in the field of corporate governance and conducting its operations with a firm commitment to values, while meeting

199 ANNUAL REPORT 2013-14

stakeholders’ expectations. The affairs of the Bank are managed in a fair and transparent manner, which is vital to retain the trust of the stakeholders of the Bank. The records of the meetings of the Board and other Directors’ Committee have been digitized and are updated regularly to facilitate availability of right information to right people at the right time. Further, compliance with all the statutory requirements is scrupulously ensured by the Bank.

The endeavor of the Bank is to provide up-to-date status to its stakeholders through its dynamic website with easier and speedier access and downloads. The website of the Bank contains all the information about its activities/functions, products, new initiatives, organization etc. Downloadable material includes application forms (i) for companies desirous to register with Bank and/or seek financial support – equity or finance for their operations, (ii) for investors who are desirous to invest in Bank’s deposit schemes etc.

200 ANNUAL REPORT 2013-14

Chapter IV

FUTURE OUTLOOK

Housing in India has emerged as one of the most vibrant and dynamic sector for the country’s economy, contributing approximately 5%–6% of the country’s GDP. The contribution of the real estate sector to India’s gross domestic product (GDP) has been estimated at 6.3% in 2013 and the segment is expected to generate 7.6 million jobs during the same period. It is also expected to generate more than 17 million employment opportunities across the country by 2025.5

The housing finance industry today comprises the entire banking sector, Housing Finance Companies (HFCs), co-operative sector institutions and other institutions viz. MFIs, NBFCs, etc. National Housing Bank was set up at a time when housing finance as a product was in its infancy, and the economy itself was on the threshold of change. From its early years, amid rapidly changing market dynamics, attendant on liberalization and deregulation, NHB had to steer a nascent sector through the transition to a competitive, dynamic and market oriented system. The policy and regulatory framework of NHB has consistently encouraged the industry to adopt market-based solutions with due regard to affordability and stability. The quality of assets in the mortgage industry is among the best in the economy.

The housing finance market in India is an important sector of the country with its linkages and interconnectedness with the other segments of the economy and a range of positive externalities. The market today stands poised for a major paradigm change in terms of institutional depth, product innovation, competition and consumer choice. Investments in housing have the potential to stimulate the economy and refuel economic growth. On the back of the growing institutional depth in the housing finance market, the coming years hold the promise of huge expansion in housing investments, leading to increased home ownership among all segments of the population. Two factors which have clearly emerged as key drivers of the housing sector are (1) wider base of stake-holders and (2) enhanced confidence in the housing finance industry. Both these factors can be effectively leveraged in today’s environment to bring about all-round development in the economy. The Government and the private industries have recognized this aspect of the housing sector as a potentially critical economic sector and powerful growth driver for the economy.

Retail housing finance is, today, available from a diverse set of institutions at competitive terms as the sector has become increasingly demand driven. Facilitating and catalyzing the credit flow in the

5Confederation of Real Estate Developers' Associations of India-, “Report on assessing the economic impact of India's real estate sector - 2013

201 ANNUAL REPORT 2013-14

housing sector, NHB's enabling policies have supported the expansion in home ownership in the country. The number of housing finance companies has grown over the years and was 59 in number at the end of June 30, 2014. NHB, through the years, has sought to perform its multiple roles in a mutually synergic manner, consistent with its Charter and has endeavoured to develop a sound, sustainable and vibrant housing finance system in the country. Introduction of new products which connect the housing finance sector to the larger economy is the emerging need of the sector. NHB’s efforts are also directed at such initiatives that include development of the securitization market, credit enhancement measures such as mortgage guarantee / insurance, conceiving covered bonds in the Indian context, risk mitigation through Central Registry, title insurance etc. With NHB’s catalyzing role, the balance sheet of the sector has consistently grown and improved in terms of flow of credit and quality of assets.

Collaborating with a number of stakeholders in the Government and private sectors, NHB has been advocating and pursuing a partnership approach for better all-round growth and penetration of the market. The Bank has adopted a number of measures that have resulted in building confidence among various constituencies viz. the savers, depositors, borrowers, lenders, institutional investors, construction agencies, rating agencies etc. This is among the central roles of the NHB that can guide the market to achieve its potential in terms of scale and depth on a sustainable basis. As an apex institution with its multi-functional role, NHB has sought to widen the housing finance market with due regard to reliability and credibility of the system.

Having adopted market infrastructure development as a priority area, NHB has worked with Central and State Governments, Reserve Bank of India, other market regulators and various other stakeholders in the public and private sector which have helped in understanding and addressing the market requirements, ranging from information collection and dissemination, to risk mitigation measures, transparency and consumer protection issues, and various other aspects of the industry. Today, the mortgage finance market in the country is witnessing a new upsurge riding on the back of a fast maturing support ecosystem amid sectoral dynamics. Information and data flow have important implications for the housing and real estate market, and NHB is in forefront of information collection and dissemination for use by all stakeholders.

Building the appropriate market infrastructure for serving the low and moderate income housing needs in urban and rural India including in the informal space will remain the focus and priority of the NHB in its policies and programs. Market-based solutions through innovative products and effective institutional mechanism will continue to receive our prime attention. The Bank has in its policies and operations, struck a healthy and judicious balance between its regulatory and promotional roles in the best interest of the sector that has brought greater depth and

202 ANNUAL REPORT 2013-14 stability in the mortgage market.

One of the biggest challenges facing the housing finance industry today is the lack of formal credit flow to the lower income segments for their housing needs. This has resulted in a huge shortage of housing for these segments, and a multi-pronged effort is required to address the problem in all its dimensions. Among other things, the recently set up ‘Credit Risk Guarantee Fund Trust for Low Income Housing’, established by the Government of India to be administered by NHB, is expected to leverage institutional financing for the smaller borrowers.

The Bank’s refinance window provides the retail lending institutions with an economical and efficient source of raising funds for their housing finance operations. Today, NHB offers a range of refinance products aimed at fulfilling the needs of the various sub-segments of the market, from rural housing to urban low income housing, housing for women, energy efficient housing and solar lighting and water heating equipments. NHB is also engaged in developing for low and moderate income households. NHB is offering this product to the primary lending institutions at concessional rates as an incentive for them to extend long term fixed rate loans to the vast segments of the population in need of such support.

The initiatives by the Government of India like allowing FDI up to 100 percent in development projects for townships and settlements, approval of the Real Estate (Regulation and Development) Bill, 2013, setting up the Urban Housing Fund and impetus to Subsidy Schemes like the Rajiv Rinn Yojana have further lent strength to the sector.

The recent budget announcements related to housing sector are very encouraging. With an allocation of` 8000 crore to support rural housing and` 4000 crore for affordable housing to NHB will increase the flow of cheaper credit for affordable housing to the rural and urban poor/EWS/LIG segments. Further, the Government has mandated to provide 'Housing for All by 2022'. With this objective the Hon'ble Finance Minister in his Budget Speech announced the setting up of a Mission on Low Cost Affordable Housing which will be anchored in the National Housing Bank. The scheme will incentivize the development of low cost affordable housing

Similar policy-based efforts like providing tax sops for the Real Estate Investment Trusts (REITs), as announced in the Union Budget of 2014- 15, could result in extracting new growth opportunities through Rental, Affordable and Senior Citizen Housing projects that can increase the depth of the industry. REITS have been successfully used as instruments for pooling of investment in several countries and such instruments will definitely attract long term finance from foreign and domestic sources including the NRIs. REITs would reduce the pressure on the banking system while also making available fresh equity.

203 ANNUAL REPORT 2013-14

NHB playing the role of market maker and enabler will consistently expand to include new sets of institutions both on demand and supply side. The challenge of mitigating housing shortage in the country through various developmental and financing initiatives, both in rural and urban areas for the low and moderate income households will continue to predominantly engage the attention and efforts of NHB and guide its policies and programs.

The National Housing Bank in its efforts to induce growth and development in the housing finance system of the country will continue to play an important catalytic role in the country. Building on the present state of the industry and existing institutional infrastructure, NHB will seek to introduce international best practices across the industry in terms of products, lending qualities, origination standards coupled with new research initiatives for the efficient functioning of the housing finance system including new innovative instruments. In order to further support, the housing finance industry by way of various measures, NHB will continue to work on the availability and expansion of data and information base for the different stakeholders of the industry at large comprising primary and secondary mortgage market. A number of these initiatives will get a fillip by introducing and promoting standardization, transparency, risk mitigation, underwriting skills for the informal sector borrowers, all of which will add to robustness and discipline in the lending markets in the country and in turn, pave the way for greater stability, and the resultant financial inclusion and capital infusion in the industry.

NHB also recognizes the importance of developing a robust and responsive Grievance Redressal Mechanism to protect the consumer interest through a system of transparent and fast processes that will go along a long way in promoting and reinforcing a truly demand-led and end-user-driven housing market in the country. The recently launched GRIDS i.e. Grievance Registration & Information Database System (GRIDS) will not only bring in transparency in our Grievance Redressal Mechanism, but is also designed for online updating of responses by NHB/ HFCs that will ensure timely and responsive redressal of issues. This will further build confidence amongst the borrowers and buyers in the market which in turn will improve market efficiency in the form of both delivery of services and products.

204 ANNUAL REPORT 2013-14

Abbreviations

ACB Audit Committee of the Board ADB Asian Development Bank AML Anti Money Laundering APMCHUD Asia Pacific Ministerial Conference on Housing and Urban Development APUHF Asia Pacific Union for Housing Finance ARDBs Agriculture Rural Development Bank BMCs Building Material Companies BSE Bombay Stock Exchange CAFRAL Centre for Advanced Financial Research and Learning CBHFL Cent Bank Home Finance Ltd. CBLO Collateralized Borrowing and Lending Obligation CCIL Clearing Corporation of India Ltd. CEO Chief Executive Officer CERSAI Central Registration of Securitization Asset Reconstruction and Security Interest of India ACHFS Apex Co-operative Housing Federations CII Confederation of Indian Industry CoR Certificate of Registration CPGRAMS Centralized Grievance Redressal and Monitoring System CPWD Central Public Works Department CRGFTLIH Credit Risk Guarantee Fund Trust for Low Income Housing CTR Cash Transaction Report CVO Chief Vigilance Officer DARPG Department of Administrative Reforms and Public Grievances DFI Development Finance Institution EC Executive Committee of Directors ECBs External Commercial Borrowings EEHRS Energy Efficient Housing Refinance Scheme EMI Equated Monthly Installment EWS Economically Weaker Section FICCI Federation of Indian Chambers of Commerce and Industry FIU-IND Financial Intelligence Unit- India GDP Gross Domestic Product GFD Gross Fiscal Deficit GJRHRS Golden Jubilee Rural Housing Refinance Scheme GoI Government of India GRIDS Grievance Registration & Information Database System HDFC Housing Development Finance Corporation Ltd. HFCs Housing Finance Companies HFI Housing Finance Institution HUDCO Housing and Urban Development Corporation Ltd.

205 ANNUAL REPORT 2013-14

ICRA Investment Information And Credit Rating Agency of India Ltd. IMGC India Mortgage Guarantee Corporation Pvt. Ltd. ISHUP Interest Subsidy Scheme for Housing the Urban Poor IT Information Technology IUHF International Union of Housing Finance JNNURM JawaharLal Nehru National Urban Renewal Mission KYC Know your Customer LAN Local Area Network LIG Lower Income Group MBS Mortgage Backed Securitization MITC Most Important Terms and Conditions MMM Material Management Module MoHUPA Ministry of Housing & Urban Poverty Alleviation MPLS Multi Protocol Label Switching MRHFL Mahindra Rural Housing Finance Ltd. NBCC National Buildings Construction Corporation Ltd. NCHF National Co-operative Housing Federation of India NHB National Housing Bank NIPFP National Institute of Public Finance and Policy NPV Net Present Value NSE National Stock Exchange PLIs Primary Lending Institutions PMLA Prevention of Money Laundering Act, 2002 PSBs Public Sector Banks RRY Rajiv Rinn Yojana RBI Reserve Bank of India RC Remuneration Committee of Directors REITs Real Estate Investment Trusts RHF Rural Housing Fund RMBS Residential Mortgage-Backed Security RML Reverse Mortgage Loan RMLA Reverse Mortgage Loan Annuity RO Regional Office RRBs Regional Rural Banks S and P Agents Servicing and Paying Agents SCBs Scheduled Commercial Banks SLCC State Level Coordination Committee SPVs Special Purpose Vehicles UCBs Urban Co-operative Banks USAID United States Agency for International Development

206 ANNUAL REPORT 2013-14

NATIONAL HOUSING BANK ANNUAL ACCOUNTS 2013-14 (July, 2013 To June, 2014)

207 ANNUAL REPORT 2013-14

V. K. VERMA & CO. CHARTERED ACCOUNTANTS

C-37, CONNAUGHT PLACE, NEW DELHI-110001 TEL. : 23415811, 23416858, 23415778, 23411014 FAX : 91-11-23417925 e-mail : [email protected] [email protected] Website: www.vkvermaco.com

INDEPENDENT AUDITOR'S REPORT

To THE MEMBERS OF NATIONAL HOUSING BANK

Report on the Financial Statements

1. We have audited the accompanying Financial Statements of National Housing Bank which comprise the Balance Sheet as at 30th June 2014, and Profit and Loss Account and the cash flow statement for the year ended on that date and summary of significant accounting policies and other explanatory information.

Manageement's Responsibility for the Financial Statements

2. Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the National Housing Bank Act, 1987 and regulations framed there under for General Fund and for special fund .in accordance with the provisions of National Housing Bank (Slum Improvements and Low Cost Housing Fund) Regulation, 1993. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment,

208 ANNUAL REPORT 2013-14

including the assessment of the risks of material misstatement of the financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Bank's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Opinion

6. In our opinion, as shown by books of bank, and to the best of our information and according to the explanations given to us:

(I) The Balance Sheet, read together with the notes thereon is a full and fair Balance Sheet containing all the necessary particulars, is properly drawn up so as to exhibit a true and fair view of the affairs of the Bank as at 30th June 2014 in conformity with accounting principles generally accepted in India;

(ii) The Profit and Loss Account, read together with the notes thereon shows a true balance of profit in conformity

(iii) The Cash Flow Statement gives a true & fair view of the cash flows for the year ended on that date.

For V.K. Verma & Co. Chartered Accountants (FRN.000386N)

CA Vivek Kumar Partner Membership No.: 503826

Date : August 8, 2014 Place: New Delhi

209 ANNUAL REPORT 2013-14

National Housing Bank Balance Sheet

Previous Year Liabilities Schedules Current Year (` in Crore) (` in Crore) 450.00 1. Capital I 450.00 3,190.40 2. Reserves II 3,631.48 0.00 3. Profit and Loss Account III 0.00 13,311.89 4. Bonds and Debentures IV 11,174.74 13,015.25 5. Deposits V 18,545.84 7,232.11 6. Borrowings VI 9,739.27 76.19 7. Deferred Tax Liability (net) 161.31 1,171.00 8. Current Liabilities and Provisions VII 1,309.91 272.49 9. Other Liabilities VIII 35.46 2.03 10. HLA deposits with banks and HFCs-as per contra 2.03 38,721.36 TOTAL 45,050.04

Amit Sinha K. Chakravarthy R. S. Garg Regional Manager Deputy General Manager Executive Director

M. Mustafa Chairman & Managing Director

Directors

Dr. Santosh Chandra Panda Dr. Neelima Risbud H. R. Khan Alok Tandon

New Delhi, August 8, 2014

210 ANNUAL REPORT 2013-14

as at 30th June, 2014

Previous Year Assets Schedules Current Year (` in Crore) (` in Crore)

2,655.23 1. Cash and Bank Balances IX 2,047.04 957.32 2. Investments X 2,480.99 34,602.94 3. Loans and Advances XI 39,931.60 24.51 4. Fixed Assets XII 24.68 479.33 5. Other Assets XIII 563.70 2.03 6. HLA deposits with banks and HFCs - as per contra 2.03

38,721.36 TOTAL 45,050.04

139.37 Contingent Liability XIV 54.10 Notes forming part of Accounts XV

As per our attached Report of even date

For V. K. VERMA & Co. Chartered Accountants Firm No. 000386N

Vivek Kumar Partner Membership No. 503826

211 ANNUAL REPORT 2013-14

National Housing Bank Profit & Loss Account

Previous Year Expenditure Current Year (` in Crore) (` in Crore) 2,220.91 1. Interest 2,554.52 10.54 2. Staff Salaries, Allowances etc. and Terminal Benefits 11.60 0.02 3. Directors' and Committee Members Fees and Expenses 0.03 0.07 4. Audit Fees 0.09 2.00 5. Rent, Taxes, Electricity and Insurance 3.30 0.41 6. Postage, Telegrams, Telex and Telephones 0.59 0.33 7. Law Charges 0.12 8. Stationery, Printing, Advertisement etc. 0.30 (i) Stationery and Printing 1.66 0.77 (ii) Advertisement 0.96 2.62 3.46 9. Depreciation on Fixed Assets 3.39 4.93 10. Brokerage, Guarantee Fee and Other Expenditure on Borrowings 22.61 5.56 11. Stamp duty on Borrowings 4.08 1.57 12. Travelling Expenses 1.82 10.91 13. Other Expenditure 14.66 @ 14. Amount recoverable written off 0.00 15.14 15. Loss/(Gain) on Revaluation of Foreign Deposits and Borrowings 7.41 0.41 16. Depreciation/Amortisation on Investment 0.51 2.67 17. Loss on Revaluation of Forward Exchange Contracts (0.92) 27.42 18. Provision for Non-Performing Assets/ Restructured Account 45.62 22.87 19. Provision for Standard Assets 22.43 36.00 20. Provision for Bad & Doubtful Debts 40.35 u/s 36(1)(viia)(c) of Income Tax Act, 1961 0.10 21. Wealth Tax 0.11 1.88 22. Deferred Tax 37.88 212.20 23. Income Tax 260.50 449.94 24. Profit carried to Balance Sheet (Refer Schedule III) 486.81 3,030.41 TOTAL 3,520.13 @ amount less than` 0.50 lakh

Amit Sinha K. Chakravarthy R. S. Garg Regional Manager Deputy General Manager Executive Director

M. Mustafa Chairman & Managing Director

Directors

Dr. Santosh Chandra Panda Dr. Neelima Risbud H. R. Khan Alok Tandon

New Delhi, August 8, 2014

212 ANNUAL REPORT 2013-14

for the year ended 30th June, 2014

Previous Year Income Current Year (` in Crore) (` in Crore) 1. Interest and Discount: 2,814.62 (i) Loans and Advances 3,143.03 121.38 (ii) Bank Deposits 219.16 0.79 (iii) Interest Income and Profit on Interest Rate Swaps 0.00 3,362.19 70.54 2. Income from Investments 139.60 5.81 3. Profit on Sale of Investments 0.00 6.28 4. Profit on Purchase and Sale of Mutual Fund 0.66 0.93 5. Discount on Forward Exchange Contract (0.03) 0.01 6. Profit/ (Loss) on sale of Fixed Assets /demolition of Building @ 5.83 7. Depreciation on Premises written back 0.00 3.54 8. Other Income 15.90 0.61 9. Provisions no longer required written back 1.81 0.07 10. Excess provision for Diminution in the Fair Value of 0.00 Restructured Accounts written back 0.00 11. Excess provision for Income Tax/ Wealth Tax written back (net) @

3,030.41 TOTAL 3,520.13 @ amount less than` 0.50 lakh

As per our attached Report of even date

For V. K. VERMA & Co. Chartered Accountants Firm No. 000386N

Vivek Kumar Partner Membership No. 503826

213 ANNUAL REPORT 2013-14

National Housing Bank

Schedule to the Balance Sheet as at 30th June, 2014

Previous Year Schedules Current Year (` in Crore) (` in Crore) SCHEDULE - I CAPITAL 450.00 1. Authorised 450.00 450.00 2. Issued and Paid-up (wholly subscribed by the Reserve Bank of India) 450.00 450.00 450.00

Schedule to the Balance Sheet as at 30th June, 2014 (` in Crore) Description Balance as on Additions Deductions Balance as on 01.07.2013 30.06.2014 SCHEDULE - II RESERVES 1. Reserve Fund 2,393.79 329.82 47.25 2,676.36 2. Special Fund (Slum Improvement & 312.44 15.99 0.00 328.43 Low Cost Housing Fund) 3. Special Reserve in terms of 446.40 101.73 0.00 548.13 Section 36(1)(viii) of Income Tax Act, 1961 4. Rural Housing Fund- Corpus 0.00 28.52 0.00 28.52 5. Urban Housing Fund- Corpus 0.00 6.05 0.00 6.05 6. Investment Fluctuation Reserve 20.08 0.00 0.00 20.08 7. Staff Benevolent Fund (SBF) 17.69 6.38 # 0.16 23.91 Total 3,190.40 488.49 47.41 3,631.48 #Including interest earned on bank deposits of` 1.68 Crore

214 ANNUAL REPORT 2013-14

National Housing Bank

Schedule to the Balance Sheet as at 30th June, 2014

Previous Year Schedules Current Year (` in Crore) (` in Crore) SCHEDULE - III PROFIT & LOSS ACCOUNT 449.94 Balance as per Profit and Loss Account 486.81 Less: Appropriations: 66.00 (a) Transfer to Special Reserve u/s 36(1)(viii) 101.73 of Income Tax Act, 1961 4.30 (b) Transfer to Staff Benevolent Fund 4.70 0.00 (c) Transfer to Rural Housing Fund- Corpus 28.52 0.00 (d) Transfer to Urban Housing Fund- Corpus 6.05 364.90 (e) Transfer to Reserve Fund 329.82 14.74 (f) Profit of Special Fund (Slum Improvement and Low 15.99 486.81 Cost Housing Fund) transferred to Special Fund A/c

0.00 0.00 SCHEDULE - IV BONDS AND DEBENTURES 1,378.10 1. Zero Coupon Bonds 777.96 376.79Less: Deferred Discount on Zero Coupon Bonds 0.00 777.96 11,311.00 2. NHB Bonds 5,424.40 3. Priority Sector Bonds: 640.18 (a) Tax-free Bonds 4,640.78 359.40 (b) Special Series Bonds 331.60 4,972.38

13,311.89 11,174.74 SCHEDULE - V DEPOSITS 12,778.18 1. Deposits from banks under Rural Housing Fund 17,278.18 0.00 2. Deposits from banks under Urban Housing Fund 1,000.00 237.07 3. Other Deposits from Public 267.66

13,015.25 18,545.84

215 ANNUAL REPORT 2013-14

National Housing Bank

Schedule to the Balance Sheet as at 30th June, 2014

Previous Year Schedules Current Year (` in Crore) (` in Crore)

SCHEDULE - VI BORROWINGS 1. From Reserve Bank of India: 15.79 Line of Credit 13.15 2. From Other Sources: (a) In India 817.00 (i) Borrowing against Term Deposits 540.00 3,911.00 (ii) Borrowing through Term Loan 5,945.00 1,031.79 (iii) Commercial Papers 0.00 6,485.00 651.05 (b) Outside India (Guaranteed by GOI) 903.87 805.48 3. CBLO Borrowings 2,337.25 7,232.11 9,739.27 SCHEDULE - VII CURRENT LIABILITIES AND PROVISIONS 1. Interest Payable: 1.50 (a) Unclaimed Interest on Capital Gains Bonds 9.13 526.14 (b) Interest Payable on Other Bonds and Debentures 430.93 199.31 (c) Interest Payable on Deposits 262.15 0.28 (d) Interest Payable on CBLO Borrowing 0.59 46.38 (e) Interest Payable on Other Borrowings 36.91 739.71 2. Provision for Retirement Benefits: 0.43 (a) Medical Expense for Retired Officers 0.80 2.23 (b) Leave Encashment 2.12 2.11 (c) Gratuity 2.02 0.93 (d) Leave Travel Concession 1.18 1.74 (e) Sick Leave 3.02 1.92 (f) Pension 0.00 9.14

216 ANNUAL REPORT 2013-14

National Housing Bank

Schedule to the Balance Sheet as at 30th June, 2014

Previous Year Schedules Current Year (` in Crore) (` in Crore)

3. Other Provisions: 13.26 (a) Provision for loss on Forward Exchange Contracts 12.34 137.87 (b) Provision for Standard Assets 160.30 180.02 (c) Provision for Bad and Doubtful Debts u/s 220.37 36(1)(viia)(c) of Income Tax Act, 1961 10.00 (d) Provision for Contingencies 10.00 0.22 (e) Provision for HLA Deposits 0.22 0.51 (f) Other Provisions 0.26 403.49 1.05 4. Redemption Payable Account 2.18 7.58 5. Capital Gains Bonds Overdue Account 6.35 1.12 6. UN-HABITAT Revolving Fund for Water & Sanitation Projects 1.12 27.04 7. Amount received under 1% Interest Subvention Scheme 61.47 4.73 8. Amount received under Interest Subsidy Scheme for 4.56 Housing the Urban Poor 4.63 9. Other Liabilities 81.89 1,171.00 1,309.91

SCHEDULE - VIII OTHER LIABILITIES 237.20 1. Unsettled transactions of 1991-92 0.17 35.29 2. Interest Payable on unsettled transactions 35.29 272.49 35.46

SCHEDULE - IX CASH AND BANK BALANCES @ 1. Cash/ Cheques in Hand @ 0.02 2. Current Account with Reserve Bank of India 0.02 3. Balance with other banks: (a) In India 38.22 (i) Current Accounts 165.59 2,150.02 (ii) Term Deposits with banks 1,441.70 12.77 (iii) Term Deposits with banks(Staff Benevolent Fund) 14.78 1,622.07 (b) Outside India 454.20 Term Deposits with banks 424.95

2,655.23 2,047.04 @ amount less than` 0.50 lakh

217 ANNUAL REPORT 2013-14

National Housing Bank

Schedule to the Balance Sheet as at 30th June, 2014

Previous Year Schedules Current Year (` in Crore) (` in Crore) SCHEDULE - X INVESTMENTS 1. Securities of Central and State Government at cost or market value whichever is less 66.57 (a) Government Securities (Pledged with CCIL for 66.16 CBLO operations) 0.00 Less: Depreciation 0.10 66.06 754.28 (b) Treasury Bills (Pledged with CCIL for CBLO operations) 2,292.30 12.04 2. Stock, shares, bonds, debentures and securities of Housing 13.95 Finance Institutions 3. Stocks, Shares, Bonds, Debentures and Securities of other Institutions: 45.00 (a) Subordinated Bonds 25.00 59.15 (b) Shares of Other Institutions 70.55 0.53 (c) Shares of Building Material Company 0.53 0.53 Less: Depreciation 0.53 0.00 20.28 (d) Subscription to Special Rural Housing Debentures 13.13 108.68 of ARDBs 957.32 2,480.99

SCHEDULE - XI LOANS AND ADVANCES I Refinance 1. Housing Finance Institutions: 16,532.49 (a) Housing Finance Companies 22,021.59 41.65 (b) Co-operative Housing Finance Societies 30.04 22,051.63 2. Scheduled Banks: 16,649.29 (a) Commercial Banks 16,547.14 771.11 (b) Regional Rural Banks 894.48 258.01 (c) Urban Co-operative Banks 163.68 17,605.30 II Direct Lending 377.84 3. Housing Boards, Development Authorities etc. 347.50 0.50 4. Water & Sanitation Projects under UN-HABITAT 0.74 34,630.89 Gross Loans and Advances 40,005.17 27.95 Less: Provisions for Non Performing Assets 73.57

34,602.94 Net Loans and Advances 39,931.60

218 ANNUAL REPORT 2013-14

0.22

0.50

0.58

0.49

0.13

1.38

0.35

24.51

20.86

19.23

As at

30.06.2013

( in Crore)

0.50

0.76

0.13

0.49

1.39

1.18

0.18

NET BLOCK

24.51

24.68

20.05

As at

30.06.2014

1.92

3.90

2.13

9.96

0.15

As at

32.44

30.06.2014

- 29.31

- 0.11

- 0.87

- 13.40

Transfer

5.98

0.25

0.12

0.13

Deletions

DEPRECIATION

Additions

0.11

9.41 0.55

2.40 1.50

0.10 0.05

0.89 0.10

1.89 0.24

1.95 0.10

29.31 3.38

As at

31.83 3.46

12.56 0.84

01.07.2013

1.00

0.87

5.08

As at

53.82

57.12

11.35

33.45

30.06.2014

@ 2.41

@ 2.63

@ 0.33

Transfer*

0.11

0.01

0.16

0.26

0.14

Deletions

COST BLOCK

2.91

0.41

3.56

0.10

1.30

0.17

0.10

0.03

1.45

Additions

1.11

0.46

9.90

2.47

3.78

0.23

2.45

53.82

51.06

33.42

As at

01.07.2013

`0.50 lakh

Total

Previous year

Description

LEASEHOLD LAND

PREMISES

FURNITURE AND FIXTURE

OFFICE EQUIPMENTS

COMPUTER AND MICRO PROCESSOR

MOTOR VEHICLE

COMPUTER SOFTWARE

ASSETS UNDER RESIDENCE FURNISHING SCHEME

Schedule to the Balance Sheet as at 30th June, 2014

SCHEDULE - XII FIXED ASSETS

@ amount less than

National Housing Bank

219 ANNUAL REPORT 2013-14

National Housing Bank

Schedule to the Balance Sheet as at 30th June, 2014

Previous Year Schedules Current Year (` in Crore) (` in Crore) SCHEDULE - XIII OTHER ASSETS 1. Interest Receivable: 36.14 (a) Bank Deposits 49.82 22.21 (b) Investments 68.62 118.44 2. Advances, Receivables, Advance Tax & Prepaid Expenses: 1.48 (a) Staff Loans and Advances 3.55 216.65 (b) Advance Tax, FBT, TDS, etc. 221.27 (c) Miscellaneous Recoverable 0.46 Considered Doubtful 0.46 0.46 Less : Provisions 0.46 0.00 2.90 (d) Prepaid Expenses 5.94 8.12 (e) Deposit with CCIL including interest receivable 13.20 35.36 (f) Amount recoverable from GOI against 39.49 exchange loss on USAID Borrowing 3.82 (g) Others 8.44 291.89 149.37 3. Unsettled transactions of 1991-92 149.37 3.28 4. Deferred Discount on Forward Exchange Contract 4.00 479.33 563.70

SCHEDULE - XIV CONTINGENT LIABILITIES 65.28 1. Income Tax 6.01 5.33 2. Guarantee given for Mortgage Backed Securitisation issue 0.00 68.76 3. Liability on account of Forward Exchange Contract 47.93 0.00 4. Performance Linked Incentives to ED's 0.16

139.37 54.10

220 ANNUAL REPORT 2013-14

SCHEDULE - XV

Notes forming parts of the accounts for the year ended 30th June, 2014

(A) Significant Accounting Policies

1. Basis of Preparation

The financial statements are prepared under the historical cost convention, on the accrual basis of accounting, unless otherwise stated and are in accordance with the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, Accountant Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) and regulatory norms prescribed by the Reserve Bank of India (RBI).

Balance Sheet and Profit and Loss Account are drawn in accordance with the requirements of the National Housing Bank Act, 1987 and National Housing Bank General Regulations, 1988 framed there under.

2. Use of Estimates

The preparation of financial statements requires that management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenue & expenses during the reporting period. Actual result could differ from those estimates. Any revision to the accounting estimates is recognized in accordance with the requirements of the respective accounting standards.

3. Income and Expenditure

3.1. Income and expenditure are accounted on accrual basis except the following, which are accounted on cash basis: 3.1.1. Income by way of penal interest, over and above the normal rate of interest, charged due to delay receipt of loan dues or non-compliance with the terms of loan. 3.1.2. Levy on pre-payment of loan. 3.1.3. Conversion charges for conversion of loan from floating to fixed rate of interest and vice-a-versa. 3.1.4. Interest on non-performing assets 3.1.5. Fee based income such as Trustee Fee and Guarantee Fee is recognized upfront in cases where such income does not exceed` 25,000/- per transaction. 3.1.6. Penalty imposed by NHB for non-compliance with the regulatory requirements or the guidelines issued by NHB from time to time. 3.1.7. Other miscellaneous receipts, such as receipts from sale of scrap/ old news papers, receipts under RTI Act, etc. 3.2. Dividend on investments is accounted for when the right to receive the dividend is established. 3.3. Pre-paid expense not exceeding` 10,000/- per transaction is charged to current period expenditure.

221 ANNUAL REPORT 2013-14

3.4. Expense not exceeding` 10,000/- per transaction is charged to current period expenditure. 3.5. Stamp duty and Issue expenses relating to floatation of bonds are recognized as expenditure in the year of issue of Bonds.

4. Investments

Investments are accounted for in accordance with the extant regulatory guidelines.

4.1. Classification

In accordance with the RBI guidelines, investments are classified into as Held to Maturity (HTM), Available for Sale (AFS) and Held for Trading (HFT). Under each of these categories, investments are further classified as (i) Government Security, (ii) Other Approved Securities, (iii) Shares, (iv) Debentures and Bonds, (v) Subsidiaries / Joint Ventures and (iv) Others.

4.2 Basis of classification:

4.2.1. Investments that the Bank intends to hold till maturity are classified as Held to Maturity. 4.2.2. Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading. 4.2.3. Investments, which are not classified in the above two categories, are classified as Available for Sale. 4.2.4. An investment is classified as Held to Maturity, Available for Sale or Held for Trading at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

4.3 Valuation:

4.3.1. In determining the acquisition cost of an investment: a) Brokerage and/or commission received on subscriptions are reduced from the cost. b) Brokerage, commission, securities transaction tax etc. paid in connection with acquisition of investments are expensed upfront and excluded from cost. c) Broken period interest paid / received on debt instruments is treated as interest expense/ income and is excluded from the cost/sale consideration. d) Cost is determined on the weighted average cost method for investments under AFS and HFT category and on FIFO basis (first in-first out) for investments under HTM category.

222 ANNUAL REPORT 2013-14

4.3.2. The transfer of a security from one category to another is accounted for at the least of acquisition cost/book value/ market value on the date of transfer, and the depreciation, if any, on such transfer is fully provided for.

4.3.3. Treasury Bills and Commercial Papers are valued at carrying cost.

4.3.4. Held to Maturity category:

Investments under Held to Maturity category are carried at acquisition cost unless it is more than the face value, in which case the premium is amortized over the period remaining maturity on constant yield basis. Such amortization of premium is adjusted against income under the head “interest on investments”. Investments in subsidiaries, joint ventures and associates are valued at historical cost. A provision is made for diminution, other than Temporary, for each investment individually.

4.3.5. Available for Sale and Held for Trading categories:

Investments held under AFS and HFT categories are individually revalued at the market price or fair value determined as per RBI guidelines, and only the net depreciation of each group for each category is provided for and net appreciation, is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.

4.3.6. Security Receipts (SRs) issued by an Asset Reconstruction Company (ARC) are valued in accordance with the guidelines applicable to non-SLR instruments. Accordingly, in cases where the security receipts issued by the ARC are limited to the actual realization of the financial assets assigned to the instruments in the concerned scheme, the Net Asset Value, obtained from the ARC, is reckoned for valuation of such investments.

5. Loans / Advances and Provisions thereon

5.1. Loans and Advances are classified as performing and non-performing, based on the guidelines issued by RBI.

5.2. Non-performing Assets (NPAs) are classified into sub-standard, doubtful and loss assets, based on the guidelines issued by RBI.

5.3. Provisions for NPAs are made as per the extent guidelines prescribed by RBI.

5.4. The sale of NPA is accounted as per the guidelines prescribed by RBI. If the sale is at a price below the net book value (NBV), the shortfall is debited to the profit and loss account, and in case of sale for a value higher than NBV, the excess provision is retained and utilized to meet the shortfall / loss on sale of other financial assets.

5.5. In case of restructured / rescheduled assets, provisions are made in accordance with the guidelines issued by RBI.

5.6. In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it confirms to the guidelines prescribed by RBI.

5.7. Amount recovered against debts written off in earlier years are recognised as revenue in the year of receipt.

223 ANNUAL REPORT 2013-14

5.8. In addition to the specific provision on NPAs, general provisions are also made for standard assets. These provisions are reflected in Balance Sheet under the head ‘Other Liabilities and Provisions’ and are not considered for arriving at net NPAs.

5.9. Advances are stated in Balance Sheet net of provision for NPAs.

5.10. Refinance provided to Agriculture and Rural Development Banks (ARDB’s) by way of Subscription to Special Rural Housing Debentures (SRHDs) deemed to be in the nature of advances are classified as Investments and is subject to the usual prudential norms applicable to loans and advances.

6. Derivative transactions

6.1.1. Interest rate swaps which hedge interest bearing assets or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the financial statement.

6.1.2. Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the assets / liabilities.

7. Fixed Assets

7.1. Fixed assets are carried at historical cost less accumulated depreciation.

7.2. Depreciation on assets (including land where value is not separable) is provided on Straight Line Method based on estimated life of the asset. Depreciation on asset has been provided at the rates furnished below: (a) Leasehold land Over lease period (b) Premises i) Constructed on free hold land and on lease land where 2.50% lease period is above 40 years ii) Constructed on lease land where Over lease period lease period is below 40 years (c) Furniture and Fixtures 10.00% (d) Computer and Microprocessors 33.33% (e) Motor Vehicles 20.00% (f) Office Equipments 20.00% (g) Furniture acquired under Residential Furnishing Scheme 10.00% (h) Electrical/electronic articles acquired under 20.00% Residential Furnishing Scheme

7.3. Fixed assets individually costing` 5,000/- and below are fully depreciated in the year of addition.

7.4. Depreciation on addition to assets is calculated for full period irrespective of the date of addition.

224 ANNUAL REPORT 2013-14

8. Employee Benefits

8.1. The Bank has a Provident Fund Scheme managed by the RBI. Contribution to the fund is made on actual basis.

8.2. Employer’s contribution to Provident Fund relating to the pension optee (part of Pension Fund) is maintained with RBI.

8.3 Liability for Gratuity, Pension, Sick Leave, Leave Encashment, Medical Retirement Benefits and Leave Travel Concession is determined on the basis of actuarial valuation at the end of the financial year. Incremental / excess liability is provided / written back to the Profit and Loss Account.

9. Taxes on Income

9.1. Tax on income for the current period is determined on the basis of taxable income and the tax credits computed in accordance with the provisions of the Income Tax act, 1961 and based on the expected outcome of assessments / appeals.

9.2. The deferred tax charge or credit is recognized, on timing difference, using the tax rates that have been enacted or substantially enacted as on balance sheet date. In terms of AS-22 issued by ICAI, provision for deferred tax liability is made on the basis of review at each balance sheet date and deferred tax assets are recognized only if there is virtual certainty of realization of such assets in future. Accordingly, Deferred tax liabilities or assets are reviewed at each balance sheet date based on development during the year.

9.3. Wealth Tax is provided in accordance with the provisions of the Wealth Tax Act, 1957.

10. Foreign Currency Transactions

10.1. All assets and liabilities in foreign currency, except USAID borrowing, are translated in Indian Rupee equivalent at the exchange rates notified by Foreign Exchange Dealers Association of India (FEDAI) prevailing at Balance Sheet date and the resulting gain or loss on the assets and liabilities, is credited or debited to Profit & Loss Account under the head ‘Gain / Loss on revaluation of foreign Deposits and Borrowings’.

10.2. In respect of USAID borrowing, the exchange loss or gain is debited or credited to the head ‘Amount Recoverable from GOI against USAID Borrowing’ as the exchange loss on USAID borrowing is borne by the GOI.

10.3. Income and Expenditure items are translated at the exchange rates prevailing on the date of the transaction.

10.4. Foreign exchange forward contracts outstanding as at the balance sheet date and not intended for trading are valued at the closing spot rate as notified by FEDAI. The premium or discount arising at the inception of such forward exchange contract is amortized as expense or income over the life of the contract. The resultant gain/loss on revaluation is recognized in the Profit & Loss Account under the head ‘Gain / Loss on revaluation of Forward Exchange Contract Account’.

10.5. Contingent liabilities on account of foreign exchange contract are reported at exchange rates notified by FEDAI at the Balance Sheet date.

225 ANNUAL REPORT 2013-14

11. Impairment of Assets

11.1. As at each Balance Sheet date, the carrying amount of assets is tested for impairment so as to determine a) the provision for impairment loss or the reversal, if any, required or b) the reversal, if any, required for impairment loss recognized in the previous period.

11.2. Impairment loss is recognised when the carrying amount of an asset exceed recoverable amount.

12. Provisions, Contingent Liabilities and Contingent Assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past event, it is probable that there will be an outflow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Assets are neither recognized nor disclosed in the financial statements. Contingent liabilities are not provided for and are disclosed by way of schedules to Balance Sheet.

(B) NOTES

13. Fixed Assets

13.1 Registration formalities are in progress in respect of commercial property situated at India Habitat Centre, Lodhi Road, New Delhi and residential property situated at Jangpura Extension, New Delhi having gross value (i.e., acquisition cost) of` 23.58 crores.

13.2 In respect of the office space acquired at India Habitat Centre (IHC), Lodhi Road, New Delhi, the exact cost has not been apportioned by IHC among the different allottees. The tripartite agreement, in this respect, is yet to be executed between Land and Development Office, GOI, IHC and institution concerned (i.e. NHB). As such, a sum of` 14.85 crores has been capitalized by the Bank on the basis of payments made to IHC.

14. External Borrowings

14.1 Under the Housing Guarantee Programme of USAID, the Bank had raised a loan of US $25 million in the US Capital Market in the year 1990-91. The loan is repayable in forty equal half yearly installments commencing from October, 2001. The outstanding balance of` 52.65 crores (after revaluation) as on June 30, 2014 is included under the head “borrowings from other sources- outside India”. Government of India (GOI) has guaranteed the loan and also agreed to bear the exchange loss, if any. The foreign currency funds received under USAID Programme has been parked with Government of India against rupee funds made available by the Government to NHB. Consequently, the exchange risk on the foreign currency funds is being borne by the Government of India. In view of this, the foreign currency funds borrowed from USAID had not been revalued till 2009-10. However, from the year 2010-11, the Bank has changed this practice and revaluing USAID borrowings. As a result of this revaluation, liability of borrowing from USAID and interest payable thereon increases by`` 35.34 crores and 0.60 crores respectively, with consequent effect in the balance of amount recoverable from GOI. However, this has no impact on the profit & loss account of the Bank.

226 ANNUAL REPORT 2013-14

The Bank had received a sum of` 36.66 crores in 2008-09 as advance from GOI towards estimated future exchange loss on the above borrowing. As per the communication received from GOI, further exchange loss if any, shall be claimed from GOI at the end of the period i.e. October, 2021. Further, as per the understanding with GOI, the Bank has provided interest @ 6% p.a. on the balance advance. After adjustment of exchange loss till the last instalment paid in April, 2014, there is adverse balance of` 3.55 cr. as on June 30, 2014. As per revaluation of the above borrowing, the loss on revaluation is recoverable from GOI. The total amount recoverable from GOI towards loss on revaluation of USAID borrowing as on June 30, 2014, is` 39.49 crores which has been shown under ‘Other Assets’.

14.2 The Bank had borrowed USD 120 million (equivalent to`` 564 crores outstanding of which, 365.35 crores as on June 30, 2014) from Asian Development Bank (ADB) in two tranches of USD 100 million and USD 20 million during the year 1997 and 2002, respectively. These loans are guaranteed by the Government of India and repayable in half yearly installments by 2022 and 2025, respectively. These dollar funds were placed as deposits with Bank of India (USD 50 million), Canara Bank (USD 50 million) and EXIM Bank (USD 20 million) in the overseas branches in terms of agreements with these Banks. The deposits are amortized in half yearly installments maturing by 2022 and 2025, respectively and are utilized for repayment of loans from ADB. In lieu of the USD deposit, these banks have subscribed to Special Series Bonds issued by NHB for`` 564 crores ( 331.60 crores is outstanding as on June 30, 2014). These Special Series Bonds are repayable in half yearly installments by 2022 and 2025, respectively.

14.3 The Bank has entered into agreements with KfW, Germany during the year 2010-11 for financing “Energy Efficient New Residential Housing” in India. The programme is under an agreement concluded in May, 2009 between the Government of the Federal Republic of Germany and Government of India on financial co-operation. The loan is guaranteed by Government of India. The total line of credit under the programme is Euro 50 million. Under the agreement, there are two lines viz, an amount of Euro 38 million under Portion A and the balance of Euro 12 million under Portion B which has been financed under concessional rate. The Bank has drawn the entire amount of Euro 50 million (equivalent to`` 382.11 crores) outstanding as on date is 393.54 crores, Euro 12 million under Portion B and Euro 38 million under Portion A. Euro 38 million (Portion A) will be repaid in 18 half yearly installment beginning June 30, 2014 and Euro 12 million (Portion B) will be repaid in 60 half-yearly installment beginning June 30, 2021.

14.4 Under the umbrella of India-UK bilateral development co-operation partnership agreed between the two countries in July 2011, NHB has entered into a collaboration with Department for International Development, Government of U.K. for a project namely “Making affordable housing market work for faster and sustained economic growth” in eight low income states of the country. Under the programme, DFID will provide total assistance of £50 million. The loan is repayable in eight equated half yearly instalments starting June, 2017. During the year 2013-14, the Bank has drawn £ 9 million (equivalent` 90.20 crore) from DFID. The outstanding borrowing as on June 30, 2014 stood at €9 million equivalent to` 92.33 crore (after revaluation).

15. Revaluation of Foreign Deposits and Borrowings/Forward Exchange Contracts

15.1 During the year 2013-14 (Jul-June), the Bank has recognized net loss of` 7.42 crores on revaluation of foreign deposits and borrowings in the Profit and Loss Account and has been shown under head ‘Gain/(Loss) on Revaluation of Foreign Deposits and Borrowings’.

227 ANNUAL REPORT 2013-14

15.2 In order to hedge forex risk on account of the excess inflow of USD from Exim Bank, the Bank has entered into forward exchange contracts. During the year July 2013 to June 2014, forward exchange contracts amounting USD 1.00 million were cancelled. As on June 30, 2014, the Bank has 14 outstanding contracts for an aggregate amount of USD 7.965 million. The total unhedged amount as on June 30, 2014 was USD 5.85 million.

15.3 As on June 30, 2014 the Bank has an outstanding borrowing of Euro 47.89 million from KfW, Germany for financing “Energy Efficient New Residential Housing” in India. The borrowing is yet to be hedged.

15.4 During the period Jul’13-June’14, Bank has booked gain on forward exchange contracts of` 0.92 crore (net) in the Profit and Loss Account under the head ‘Loss / (Gain) on revaluation of Forward Exchange Contracts’ after adjusting gain of` 0.80 crore on maturity of contracts.

16. Employee Benefits - AS 15 (revised 2005)

16.1 The Bank has provided the liability towards employee benefits for Gratuity, Leave Encashment, Medical Retirement Benefits, Sick Leave, Leave Travel Concession, and Pension on actuarial basis for its permanent employees in accordance with the AS-15 (revised 2005) issued by Institute of Chartered Accountants of India.

16.2 The Bank is transferring its contribution of provident fund to Reserve Bank of India in respect of its employees who have opted for Contributory Provident Fund. During the year ended June 30, 2014, the Bank has contributed` 0.04 crores to Provident Fund and has charged the same to Profit and Loss Account under the head ‘Staff Salaries, Allowances and Terminal Benefits’.

16.3 As per National Housing Bank (Employees’) Pension Regulations, 2003, the Bank provides for pension, a defined benefit retirement plan covering all employees who have opted for pension plan. The scheme provides a monthly pension payment to employees on retirement or termination of employment as per Service Regulation. The scheme is managed by a separate trust and the liability for the same is recognized on the basis of actuarial valuation in addition to Bank’s monthly contribution to the fund.

The employees, who have joined the services of the Bank on or after 1st April, 2010 are governed by a Defined Contributory Pension Scheme, which shall be governed by the provision of the Contributory Pension Scheme introduced for officers of the Central Government w.e.f. 1st January, 2004 and as modified from time to time. Till 30th June, 2014, the employees have contributed `0.24 crore under the scheme and the Bank has also provided for equivalent contribution for the same.

16.4 Defined benefit Obligations : Gratuity, Leave Encashment, Medical Retirement benefits, Sick Leave, Leave Travel Concession and Pension payable to employees as on 30th June, 2014.

a) Methodology used in actuary calculation : Actuary has used the Projected Unit Credit Method to assess the plan’s liabilities including those related to death and service.

228 ANNUAL REPORT 2013-14 b) A reconciliation of opening and closing balances of present value of defined benefit obligation and the effects during the period attributable to each of the following:

Amount in ` Change in Gratuity Leave Medical Sick Leave Travel Pension benefit Encashment** Leave** Concession ** obligations Present Value of 21,058,861 - 4,288,940 --277,228,523 Obligation at the beginning of the year Current Service 1,700,288 ----8,613,299 Cost Interest cost 1,531,554 - 313,098 --23,766,009 Actuarial (717,066) - 349,832 --(54,092,323) (Gain)/Loss on Obligations Benefits paid (3,345,562) - (684,877) --(14,320,472) Present Value of 20,228,075 - 7,952,274 --241,195,036 Obligation at the end of the year c) Amount recognized in the statement of Profit & Loss Account Amount in ` Defined Gratuity Leave Medical Sick Leave Travel Pension Benefits Encashment** Leave** Concession ** Current Service 1,700,288 --- -8,613,299 Cost Interest Cost 1,531,554 - 313,098 --23,766,009 Expected return NA NA NA NA NA (20,165,720) on plan assets Actuarial (717,066) - 349,832 --(65,228,697) (Gain)/Loss Expenses/ 2,514,776 - 4,348,211 --(53,015,109) (Income) Amount --(189,401) --- contributed by ex-employees Expenses/(Income 2,514,776 - 4,158,810 --(53,015,109) recognized in the statement of Profit and Loss Account d) Investment details of plan assets:

The Bank has not funded the liability as on June 30, 2014. As such there is no fair value of assets except for pension liability which is managed by a separate trust.

229 ANNUAL REPORT 2013-14 e) The Principal Actuarial assumptions used as at the Balance Sheet date:

Defined Gratuity Leave Medical Sick Leave Leave Travel Pension Benefits Encashment Concession Discount Rate 8.80% p.a 8.80% p.a 8.80% p.a 8.80% p.a 8.80% p.a 8.80% p.a

Salary 6% p.a. 6% p.a. NA 6% p.a. NA 6% p.a. Escalation Rate Expected NA NA NA NA NA 8% p.a. return on plan assets Mortality Rate Indian Indian Indian Indian Indian Indian Assured Lives Assured Lives Assured Lives Assured Lives Assured Lives Assured Lives Mortality Mortality Mortality Mortality Mortality Mortality (2006 - 08) (2006 - 08) (2006 - 08) (2006 - 08) (2006 - 08) (2006 - 08) Ultimate Ultimate Ultimate Ultimate Ultimate Ultimate Withdrawal 8% 8% NA 8% 8% 8% Retirement 60 years 60 years 60 years 60 years 60 years 60 years Inflation ----8% - Lapsation ----3% - Disability 5% 5% 5% 5% 5% -

f) Change in plan assets Amount in `

Defined Gratuity Leave Medical Sick Leave Travel Pension * Benefits Encashment** Leave** Concession**

Fair value of NA NA NA NA NA 258,060,545 plan assets at the beginning of the year Expected NA NA NA NA NA 20,165,720 return on plan assets Actuarial NA NA NA NA NA 11,136,374 Gain/(Loss) Benefits paid NA NA NA NA NA (14,320,472)

Employer NA NA NA NA NA 2,342,384 contributions Fair value of NA NA NA NA NA 277,384,551 plan assets at the end of the year*

* The Bank has not funded the liability as on June 30, 2014. As such there is no fair value of assets except liability for pension. ** As per paragraph 132 of the Indian Accounting Standard 15 (revised), no specific disclosures are required for other long term benefits.

230 ANNUAL REPORT 2013-14

17. Revenue Recognition

Certain items of income (say, pre-payment levy, penalty and miscellaneous receipts) are recognized on cash basis. However, such income is not considered to be material.

18. Security Transactions of 1991-92

18.1 Pursuant to the judgment of the Hon’ble Supreme Court, NHB has paid a sum of` 236.78 crores together with cost of`` 0.26 crore to SBI and has lodged its claim for return of 94.20 crores with the Custodian, Special Court. The application for release of the amount by the Custodian to NHB is still pending before the Special Court. The interest amount, if any, payable to SBI in respect of the said matter and receivable from the Custodian is yet to be decided. NHB is also in the process of claiming the balance amount together with interest etc. from another bank pursuant to an indemnity executed in its favour by the said bank which will be accounted for on actual receipt.

18.2 The disputes between NHB and SBI and NHB and Grindlays Bank (since amalgamated with Standard Chartered Bank) have been settled and no claim exists between the parties against each other with regard to these disputes. However, any money to be recovered from the estate of legal heir of the late Sh. Harshad Mehta by SBI and Standard Chartered Bank in accordance with the decrees passed in their favour by the Special Court will be shared by them with NHB in the agreed manner and will be accounted for on actual receipt.

18.3 As per the Terms of the Settlement agreed between SBI and NHB on October 30, 2002, recoveries if any, made in M.P. No.63 of 1992 was to be shared between SBI and NHB in such proportion as may be determined by the Reserve Bank of India (RBI). The principal amount of the decree i.e.` 706.97 crores in M.P.No.63 of 1992 has been satisfied in full. RBI has also determined the share and directed SBI to share the amount of` 706.97 crore in equal proportion less expenses and cost of litigation. NHB is yet to receive the amount from SBI as determined by RBI.

18.4 A sum of` 345.76 crores is also to be released by the Custodian in favour of Standard Chartered Bank (SCB) out of the principal amount of` 506.54 in the decree passed in its favour in Suit No. 28 of 1995. As per the understanding between NHB and SCB, NHB is also entitled to share the amount realized by SCB in the said decree. The amount will be shared in a proportion inverse to the proportion in which the amount of` 1,645.87 crores was shared between NHB and SCB, after the same is received by SCB. These amounts will be accounted for on actual receipts.

18.5 A Miscellaneous Application has been filed before the Special Court, Mumbai by Smt. Jyoti H. Mehta wife of Late Harshad S. Mehta, against NHB, SCB and others alleging sale of 2 crore Units of the Unit Trust of India 1964 Scheme belonging to Harshad S. Mehta for which consideration of a sum of` 27.25 crores was paid by him to NHB and are lying unclaimed by the Custodians for the past several years. NHB has admitted the receipt of the said sum of` 27.25 crores and also offered to deposit the same but has denied any transaction with late Sh. Harshad S. Mehta and has filed its reply.

19. Segment Reporting

The Bank’s operations predominantly comprise only one segment i.e. financial activities. Hence, there are no separate reportable segments as per the Accounting Standard on “Segment Reporting” (AS 17) issued by the Institute of Chartered Accountants of India.

231 ANNUAL REPORT 2013-14

20. Related Party Disclosures

a) List of Related Parties: i) Key Managerial Personnel : Shri Mohammad Mustafa** & Shri R. V. Verma* ii) India Mortgage Guarantee Corporation Private Limited (IMGC)

b) Transactions with Related Parties:

Name of Nature of Nature of Amount of Outstanding the Party Relationship Transaction transaction as on 30th during the year June, 2014 Shri R.V.Verma Key Management Remuneration & ` 31.09 lakhs Nil Personnel - benefits including Chairman & perquisites Managing Director IMGC Substantial interest Equity Capital ` 11.40 crores ` 70.30 crores in the Share Contribution Capital

* Consequent upon demitting office by Shri R.V.Verma, Chairman & Managing Director, National Housing Bank (NHB) with effect from 13th May, 2014, GOI has appointed Shri Mohammad Mustafa, as CMD, NHB till such time a regular incumbent is appointed by the Government. ** No remuneration and benefits have been paid to Shri Mohammad Mustafa during the year.

As the Bank is state controlled enterprise within the meaning of AS-18 ‘Related Party Disclosures’, the related party relationship with other state controlled enterprises and transactions with such enterprises are not given.

21. Income tax

Additional demand of` 130.56 crores raised by the Income Tax Department on imposing penalties in respect of disallowance of Bank’s claim u/s 36(1)(viii) of the Income Tax Act, 1961 for assessment years (AYs) 2003-04 to 2006-07, 2008-09 and 2009-10, disallowance of business loss of` 150.45 crores for AY2003-04 and additional demand of` 91.05 crores for AY2010-11 due to certain additions and disallowances has been paid and is being contested.

The management does not consider it necessary to make any provision in this regard in view of the legal opinion obtained by it.

22. Deferred Tax

22.1 As on June 30, 2014, the Bank has recorded net deferred tax liability (DTL) of 161.31 crores. A composition of deferred tax assets and liabilities is given below:

232 ANNUAL REPORT 2013-14

(` in Crore) Sr. Particulars June 30, June 30, No. 2014 2013 Deferred Tax Assets: 1 Provision for Medical aid to Retired Staff 0.27 0.14 2 Provision for Leave Encashment 0.72 0.73 3 Provision for Gratuity 0.69 0.68 4 Provision for Leave Travel Concession 0.40 0.30 5 Provision for Guarantee Fee 0.01 0.00 6 Defined Contributory Pension Scheme 0.08 0.07 Total Deferred Tax Assets (A) 2.17 1.92 Deferred Tax Liabilities: 1 Depreciation 3.42 3.07 2 Special Reserve u/s 36(1)(viii) of Income Tax Act, 1961 160.06 75.04 Total Deferred Tax Liabilities (B) 163.48 78.11 Net Deferred Tax Liability (B-A) 161.31 76.19

The Bank was maintaining DTL on the Special Reserve created u/s 36(1)(viii) of the Income Tax Act 1961 upto AY2009-10 since the claim of the Bank has been disallowed by IT Department and the Bank is in appeals with CIT/ITAT. However, Bank had not created DTL on the Special Reserve from AY 2010-11 onwards as approved by the Board through a special resolution, not to make any withdrawal from the said reserve.

The Reserve Bank of India, vide its circular dated 20th December 2013, has advised Banks to create a deferred tax liability (DTL) on outstanding amount in Special Reserve, as a matter of prudence. Accordingly, the expenditure, amounting to` 47.25 crores has been adjusted from the reserve fund for DTL on Special Reserve pertaining to earlier years not previously charged to the Profit & Loss Account.

23. Home Loan Account Scheme

23.1 The Home Loan Account Scheme (HLAS) was launched by NHB with effect from July 1, 1989 all over the country and was operated through Scheduled Banks and Housing Finance Companies (HFCs). The HLAS has been discontinued effective from March 1, 2004.

23.2 The deposits under HLAS held by the banks/HFCs stood at` 2.03 crores as per information received by NHB and the same has been disclosed as contra entries in the balance sheet.

23.3 India Housing Finance and Development Ltd., a housing finance company in the private sector, which was one of the participating HFC for mobilization of deposits under HLAS, was advised by NHB not to open new accounts/accept fresh deposits under HLAS with effect from 01.10.1994 due to serious financial problem faced by it. NHB being the principal under the scheme, was obliged to meet liability to pay account holders their dues. The Bank assessed the initial liability of` 0.49 crore as against verifiable claimants of IHFD under HLAS and made provision of the equal amount in 2004-05. As per the approved procedure, claims for refund of` 0.27 crore was paid till June 30, 2014 and balance of` 0.22 crore stood as liability as on that date.

233 ANNUAL REPORT 2013-14

24. Other Expenditure

The break-up of other expenditure shown in the Profit and Loss Accounts is as under: (` in Crore) Particulars 2013-2014 2012-2013

1. Repair and Maintenance 1.44 1.36 2. Research and Development 0.30 0.21 3. Service Tax Expense 1.49 0.69 4. Prior Period Expense 0.81 0.29 5. Conveyance Expense 0.49 0.39 6. Professional Fee 0.79 0.35 7. Conference Expense 0.14 0.34 8. Hospitality Expense 0.13 0.12 9. Expenses on IT related services 1.54 0.82 10. Payment to outsourced services 1.63 1.25 11. Security Service Expense 1.44 1.07 12. Others 4.46 4.02 Total 14.66 10.91

25. Investment Fluctuation Reserve Account

As per RBI guidelines on prudential norms for classification, valuation and operation of investment portfolio for FIs, the provision required to be created on account of depreciation in the Available for Sale category in any year should be debited to the Profit & Loss Account and an equivalent amount (net of taxes) or balance available in the Investment Fluctuation Reserve (IFR) Account, whichever is less, shall be transferred from Investment Fluctuation Reserve Account to the Profit & Loss Account. In the event provisions created on account of depreciation in the available for sale category are found to be in excess of the required amount in any year, the excess is credited to the Profit & Loss Account and an equivalent amount (net of taxes, if any) is appropriated to the Investment Fluctuation Reserve Account.

26. Impairment of assets

In the opinion of the management, there is no material impairment of any of the Assets of the Bank as per the Accounting Standards 28-Impairment of Assets.

27. Investment classification

27.1 As stated, investments are classified into “Held for trading”, “Available for Sale” and “Held for Maturity” categories as per the following details:

234 ANNUAL REPORT 2013-14

(` in Crore) Categories of Investments As on As on investment June 30, 2014 June 30, 2013 Held to Maturity(HTM) a) GOI Dated Securities 56.56 56.97 b) Subordinated Bonds 25.00 45.00 Sub-total 81.56 101.97 Available for Sale(AFS) a) GOI Dated Securities 9.60 9.60 b) Treasury Bills 2292.30 754.27 d) Shares of Housing Finance Institutions 13.95 12.04 e) Shares of Other Institutions# 70.55 59.15 f) Building Material Company 0.53 0.53 Sub-total 2386.93 835.59 Gross Investments 2468.49 937.56 Less: Depreciation 0.63 0.53 Net Investments 2467.86 937.03

#Investments in shares of other institutions includes` 11.40 crores made on 20.06.2014 in the equity capital of India Mortgage Guarantee Corporation Private Limited (IMGC) (Total` 70.30 crores as on June 30, 2014).

27.2 In addition to the above, the Bank has also subscribed to the Special Rural Housing Debentures of ARDBs and outstanding subscription (net) as on June 30, 2014 is stood at` 13.13 crores (previous year` 20.28 crores).

Pursuant to the directives of RBI, the refinance provided to Agriculture and Rural Development Banks by way of subscription to the Special Rural Housing Debentures (SRHDs) floated by these agencies, are treated as under:

a) Classified as Investments and shown in Schedule-X under the head ‘Stocks, Shares, Bonds, Debentures and Securities of other Institutions’ which was hitherto shown as part of ‘Refinance’ in Schedule-XI.

b) Interest earned on the same is shown as a part of ‘Interest received on Loans and Advances’ in the Profit and Loss Account, treating them as ‘deemed advances’.

c) Deemed Advances for the purpose of Income recognition, Asset Classification, Provisioning, Capital Adequacy and computation of ratios etc.

28. Contingent Liability

The movement in Contingent Liability as required in AS 29 is as under: (` in Crore) Particulars June 30, 2014 June 30, 2013 Opening Balance as on July 1 139.37 65.19 Addition during the period 0.16 78.90 Reduction during the year (85.43) (4.72) Closing Balance as on June 30 54.10 139.37

235 ANNUAL REPORT 2013-14

29. Rural Housing Fund

Rural Housing Fund was first established as per the announcement made by the Hon’ble Finance Minster, while presenting the budget for the year 2008-09. The fund was set up with contribution by scheduled commercial banks not achieving their priority sector lending obligations. The fund was set up with the National Housing Bank to enhance its refinancing operations to the rural housing sector. Till June 30, 2014, the Bank has received total amount of` 17,278.18 crores under this fund including` 4,500 crores during the year 2013 - 14 (July-June) and the same has been shown under the head ‘Deposits’. In terms of RBI directions contained in their letter dated 22.07.2013, surplus on income from RHF 2013-14 was to be ploughed back to the respective fund. Accordingly, for the year 2013-14, an amount of` 28.52 crores was taken to RHF Corpus Fund.

30. Urban Housing Fund

During 2013-14, Urban Housing Fund of` 2,000 crores with contributions from scheduled commercial banks, as allocated by Reserve Bank of India, was set up with NHB to augment its resources and improve credit availability. This Fund will enhance refinancing operations to the urban housing sector and to meet the housing needs of the people in lower income segments residing in urban areas. Till June 30, 2014 the Bank has received total amount of` 1,000 crores and the same has been shown under the head ‘Deposits’. In terms of RBI directions contained in their letter dated 22.07.2013, surplus on income from UHF 2013-14 was to be ploughed back to the respective fund. Accordingly, for the year 2013-14, an amount of` 6.05 crores was taken to UHF Corpus Fund.

31. Zero Coupon Bonds

During the year 2008-09, the Bank had issued Zero Coupon Bonds (ZCBs) for a face value of` 1,050 crores, discounted value being` 453.39 crores. These bonds were issued for tenure of ten years. The discount is amortised over the tenure of the bonds. A sum of` 59.63 crores discount has been amortised during the financial year 2013-14 (Jul-June). The unamortized balance of discount as on June 30, 2014 is` 272.04 crores.

32. Securitisation

NHB is authorized to carry out securitization transactions and issue mortgage backed securities as trust certificates of beneficial interest and act as Trustee for the holders of such securities under the National Housing Bank Amendment Act, 2000 [Sections 14 (ea), 14 (eb) and 14 (ec)]. During the calendar year 2000-2007, NHB has completed 14 residential mortgage backed securitization (RMBS) transactions involving 38,809 individual housing loans of six Housing Finance Companies (HFCs) and one Scheduled Commercial Bank, for` 862.20 crores. The transaction involves assignment and transfer of a pool of housing loans along with the underlying mortgages, from the primary lending institution to NHB. Simultaneously, an express declaration of trust is made by NHB in respect of the mortgage debt, appointing itself as the trustee for the benefit of the investors. Once the assets have been declared property in trust (“the Trust”), the Trust will issue Pass Through Certificates to investors. During the financial years 2008-09 to 2012-13, 10 RMBS transactions and their respective Special Purpose Vehicle trust have been closed. Similarly, during the financial year 2013-14, 4 RMBS transactions have been closed. As on June 30, 2014, there were no RMBS outstanding transactions.

236 ANNUAL REPORT 2013-14

33. Consolidation of Special Fund with the General Fund

33.1 The Voluntary Deposits (Immunities and Exemptions) Act, 1991 was passed with the objectives of providing certain immunities and exemptions from direct taxes to persons making voluntary deposits with the National Housing Bank and exemptions from direct taxes in relation to such amounts. The amount so collected under the Voluntary Deposits Scheme is required to be kept in a Special Fund exclusively for the purpose of financing slum clearance and low cost housing for the poor. In terms of National Housing Bank (Slum Improvement & Low Cost Housing Fund) Regulations 1993, Profit and Loss Account for the year ended 30th June and Balance Sheet as on that date are required to be prepared each year in respect of the Special Fund and audited by the Statutory Auditors appointed by the Reserve Bank of India under Section 40 (1) of the National Housing Bank Act, 1987.

33.2 Accordingly, the Profit and Loss account and the Balance Sheet of the Special Fund have been prepared as per the provision of the National Housing Bank (Slum Improvement & Low Cost Housing Fund) Regulations, 1993 and attached as Annexure to these financial statements. The balance lying in the Special Fund is included under the head “Reserves” in the Bank’s consolidated Balance Sheet. Various assets and liabilities of the Special Fund have also been grouped in the consolidated Balance Sheet under the respective heads.

34. Re-grouping

Figures for the previous year have been re-grouped, wherever necessary, so as to make them comparable with those of the current year.

35. (a) Cash Flow Statement for the year ended June 30, 2014 (` in Crore)

A) CASH FLOW FROM OPERATING ACTIVITIES Net Profit as per Profit & Loss Account 486.81 Adjustments for: Provision for Tax 260.50 Provision for Wealth Tax 0.11 Provision for Deferred Tax 37.88 Depreciation on Fixed Assets 3.39 Depreciation on investments & amortisation expense 0.51 Provision for Standards Assets 22.43 Provision for Non-performing Assets / Restructured Account 45.62 Loss on revaluation of Forward Exchange Contracts (0.12) Provision for Bad Debts u/s 36(1)(viia)(c) of Income Tax Act, 1961 40.35 (Profit)/Loss on sale of Fixed Assets (0.01) (Gain)/Loss on revaluation of Foreign Deposits & Borrowings 6.05 Provisions no longer required written back (1.81) Income from Investments (139.60) Profit on purchase and sale of Mutual Funds (0.66) Operating Profit before working capital changes 761.46 Adjustments for Working Capital (Increase)/Decrease in Deposits with Banks 742.15

237 ANNUAL REPORT 2013-14

(Increase)/Decrease in Loans & Advances (5374.29) (Increase)/Decrease in Other Assets 154.21 Increase/(Decrease) in Current Liabilities (419.73) Net cash from operating activities before taxes paid (4136.19) Less : Income Taxes Paid (238.46) NET CASH FLOW FROM OPERATING ACTIVITES BEFORE EXTRAORDINARY ITEMS (4374.65) Extraordinary Items 0.00 NET CASH FLOW FROM OPERATING ACTIVITES AFTER EXTRAORDINARY ITEMS (A) (4374.65) B) CASH FLOW FROM INVESTING ACTIVITIES BEFORE EXTRAORDINARY ITEMS (Increase) / Decrease in Fixed Assets (3.55) (Increase)/Decrease in Investments (1524.18) Income from Investments 139.60 Profit on purchase and sale of Mutual Funds 0.66 NET CASH GENERATED FROM INVESTING ACTIVITES BEFORE EXTRAORDINARY ITEMS (1387.47) Receipts from sale of equity of HFCs 0.00 NET CASH GENERATED FROM INVESTING ACTIVITES AFTER EXTRAORDINARY ITEMS (B) (1387.47) C) CASH FLOW FROM FINANCING ACTIVITIES Net income under Staff Benevolent Fund 1.52 Increase / (Decrease ) in Bonds & Debentures (2137.14) Increase / (Decrease ) in Deposits 5530.59 Increase/(Decrease) in Borrowings 2494.53 NET CASH GENERATED FROM FINANCING ACTIVITES (C) 5889.50 Net increase in cash and cash equivalents (A+B+C) 127.37 Cash and cash equivalents at the beginning of the year 38.24 Cash and cash equivalents at the end of the year 165.61

35. (b) Schedule to Cash & Cash Equivalents (` in Crore) Particulars At the At the beginning end of the year of the year Balances with Reserve Bank of India 0.02 0.02 Balance with banks-Current Account 38.22 165.59 Cash and cash equivalent before exchange 38.24 165.61 rate adjustments Effect of exchange rate changes-unrealised gains 0.00 0.00 Cash and cash equivalent after exchange rate adjustments 38.24 165.61

238 ANNUAL REPORT 2013-14

36 Additional Disclosures as per RBI Guidelines

36.1 Capital: Particulars 30.06.2014 30.06.2013 a. (i) Capital to Risk Assets Ratio (CRAR) 15.06% 16.59% (ii) Core CRAR 13.81% 15.34% (iii) Supplementary CRAR 1.25% 1.25% b. Amount of subordinated debt raised and outstanding as Tier II Capital: Nil (Previous Year-Nil) c. Risk Weighted Assets: (` in Crore)

Particulars 30.06.2014 30.06.2013 (i) On balance sheet items 26734.59 21375.77 (ii) Off balance sheet items 95.05 55.33 d. Share-holding pattern as on the date of the Balance Sheet: Capital of the Bank is wholly subscribed by the Reserve Bank of India

36.2 Asset Quality and Credit Concentration: e. Percentage of Net NPAs to Net Loans and Advances : 0.28% (Previous Year 0.45%) f. Provision Coverage Ratio 39.81% (Previous Year 15.18%) g. Amount and percentage of Net NPAs under the prescribed asset classification categories : (` in Crore) Particulars 30.06.2014 30.06.2013 Amount %age Amount %age Sub-Standard 0.71 0.63% 153.53 98.35% Doubtful 110.52 99.37% 2.57 1.65% Loss 0.00 0.00 0.00 0.00 Total 111.23 100% 156.10 100% h. Amount of provisions made during the year: (` in Crore) Particulars 30.06.2014 30.06.2013 - Standard Assets 22.43 22.87 - Bad Debts u/s 36(1)(viia) of the IT Act, 1961 40.35 36.00 - Non Performing Assets 45.62 27.42 - Investments 0.51 0.41 - Wealth Tax 0.11 0.11 - Income Tax 260.50 212.20 - Deferred Tax 37.88 1.88

I. Movement in net NPAs: (` in Crore) Particulars 2013-14 2012-13 Opening balance 156.10 3.03 Additions during the year 0.71 153.07 Reductions during the year 45.58 0.00 Closing balance 111.23 156.10

239 ANNUAL REPORT 2013-14 j. Credit exposure as percentage to capital funds and as percentage to Total Assets:

Particulars 30.06.2014 30.06.2013 %age to %age to total %age to %age to total Capital Fund Assets Capital Fund Assets - The largest single borrower 86.32% 7.74% 71.64% 6.58% - The largest borrower group 137.02% 12.29% 153.04% 14.05% - The 10 largest single borrowers 593.42% 53.23% 526.39% 48.33% - The 10 largest borrower groups $ 598.93% 53.73% 574.68% 52.76%

$ NHB has only Eight borrower groups k. Credit exposure to the five largest industrial sector as percentage to total loan assets: Not Applicable

36.3 Liquidity: l. Maturity Pattern of rupee assets and liabilities m. Maturity Pattern of foreign currency assets and liabilities (` in Crore)

Items Less thanor More than a More than 3 More than 5 More than 7 Total equal to year upto year upto year upto years 1 year 3 years 5 years 7 years Rupee Assets 17,616.50 11,075.17 8,234.03 3,760.09 3,939.30 44,625.09 Foreign Currency Assets 37.66 83.20 95.00 108.54 100.55 424.95 Total 17,654.16 11,158.37 8,329.03 3,868.63 4,039.85 45,050.04 Rupee Liabilities 13,420.76 5,353.75 6,508.41 9,599.73 9,263.53 44,146.18 Foreign Currency Liabilities 76.92 154.99 217.29 217.50 237.16 903.86 Total 13,497.68 5,508.74 6,725.70 9,817.23 9,500.69 45,050.04

Previous Year (` in Crore) Items Less thanor More than a More than 3 More than 5 More than 7 Total equal to year upto year upto year upto years 1 year 3 years 5 years 7 years Rupee Assets 15,788.85 11,192.42 6,769.86 2,364.11 2,151.92 38,267.16 Foreign Currency Assets 34.80 76.86 87.74 100.21 154.59 454.20 Total 15,823.65 11,269.28 6,857.60 2,464.32 2,306.51 38,721.36 Rupee Liabilities 14,683.57 5,912.38 4,756.35 8,141.50 4,576.51 38,070.31 Foreign Currency Liabiliies 55.95 151.11 119.06 106.02 218.91 651.05 Total 14,739.52 6,063.49 4,875.41 8,247.52 4,795.42 38,721.36

240 ANNUAL REPORT 2013-14

36.4 Operating results: Particulars 2013-2014 2012-2013 n. Interest Income as a percentage to average Working Funds 8.37% 8.53% o. Non-interest income as a percentage to average Working Funds 0.04% 0.05% p. Operating profit as a percentage to average Working Fund 2.11% 2.15% q. Return on average Assets 1.16% 1.28% r. Net Profit per employee (` in Crores) 4.55 4.84

36.5 Movement in the provisions: I. Provisions for Non-Performing Assets (Loan Assets) (` in Crore) Particulars 2013-2014 2012-2013 Opening balance as at the beginning of the financial year 27.95 0.53 Add: Provisions made during the year 45.62 27.42 Less: Write off, write back of excess provision 0.00 0.00 Closing balance at the close of the year 73.57 27.95

II. Floating Provisions (` in Crore) Particulars 2013-2014 2012-2013 Opening balance as at the beginning of the financial year 0.00 0.00 Add: Provisions made during the year 0.00 0.00 Less: Write off, write back of excess provision 0.00 0.00 Closing balance at the close of the year 0.00 0.00

III. Provisions for Depreciation in Investments (` in Crore) Particulars 2013-2014 2012-2013 Opening Balance at the beginning of the financial year 0.53 0.53 Add: i) Provisions made during the year 0.00 0.00 ii) Appropriation, if any, from Investment 0.00 0.00 Fluctuation Reserve Account during the year Less: i) Write off during the year 0.00 0.00 ii) Transfer, if any, to Investment Fluctuation Reserve Account 0.00 0.00 Closing balance at the close of the financial year 0.53 0.53

36.6 Restructured Accounts: (` in Crore) Particulars 2013-2014 2012-2013 a) Total Amount of loan assets 184.20 183.52 Sub-standard assets 0.68 183.02 Doubtful assets 183.52 0.50

241 ANNUAL REPORT 2013-14

0 184.2

0 180.11

0 0.68

0 183.53

Loss Total

( in Crore)

3.42

183.52

Doubtful

Total

0 180.11

0.68

Sub

180.11

Standard

0 184.20

0 180.11

0 0.68

0 183.53

Loss Total

3.42

183.52

Doubtful

Others

0 180.11

0.68

Sub

180.11

Standard

Loss Total Standard

Doubtful

Sub

Standard

Under SME Debt Restructuring Mechanism

Standard

Loss Total

Doubtful

Sub

Under CDR Mechanism

Standard

No. of

thereon

Amount

Provison

borrowers

outstanding

borrowers

outstanding

Details

Asset Classification

Type of Restructuring

during the FY

July 1 of the

category during the FY

FY (opening figures)

30 of the FY (closing figures)

accounts during the FY

at the beginning of the next FY

Restructured Accounts as on

Restructured Accounts as on June

Fresh restructuring during the year

Write-offs of restructured accounts

as restructured standard advances

cease to attract higher provisioning

Upgradation to restructured standard

Downgradations of restructured

and/or additional risk weight at the end

Restructured standard advances which

of the FY and hence need not be shown

2 3 4 5 7

S.No.

36.7 Particulars of Restructured Accounts:

242 ANNUAL REPORT 2013-14

36.8 Financial Assets Sold to Securitisation Company / Reconstruction Company: (` in Crore)

Particulars 2013-2014 2012-2013 a) No. of Accounts 0.00 0.00 b) Aggregative value (Net of Provisions) of Accounts sold to SC/RC 0.00 0.00 c) Aggregate consideration 0.00 0.00 d) Additional consideration realized in respect of 0.00 0.00 Accounts transferred in earlier years e) Aggregate gain / loss over net book value 0.00 0.00

36.9 Forward Rate Agreements and Interest Rate Swaps: (` in Crore) Particulars 2013-2014 2012-2013 a) Notional principal of swap agreements 0.00 0.00 b) Nature and terms of the swaps Fixed to Floating Hedge c) Quantification of losses which would be incurred if the counter 0.00 0.00 parties failed to fulfill their obligations under the agreements d) Collateral required by the entity upon entering into swaps NA NA e) Concentration of credit risk arising from the swaps 0.00 0.00 f) The "Fair" value of total swaps book 0.00 0.00

36.10 Interest Rate Derivatives: Nil (Previous Year-Nil)

36.11 Investments in Non Government Debt Securities:

A. Issuer Categories in respect of investments made

Current Year (` in Crore)

Amount of Sr. investments made 'below investment 'unrated' 'unlisted' No. Issuer Amount through private grade' Securities Securities placement Securities held (1) (2) (3) (4) (5) (6) (7) 1 PSUs 0.00 0.00 0.00 0.00 0.00 2 FIs 0.00 0.00 0.00 0.00 0.00 3 Banks 25.00 25.00 0.00 0.00 0.00 4 Private Corporates 0.00 0.00 0.00 0.00 0.00 5 Subsidiaries/Joint 0.00 0.00 0.00 0.00 0.00 Ventures 6 Others 13.13 0.00 0.00 13.13 13.13 7 Provisions held towards 0.00 0.00 0.00 0.00 0.00 depreciation Total 38.13 25.00 0.00 13.13 13.13

243 ANNUAL REPORT 2013-14

Previous Year (` in Crore) Amount of Sr. investments made ' below investment 'unrated' 'unlisted' No. Issuer Amount through private grade' Securities Securities placement Securities held (1) (2) (3) (4) (5) (6) (7) 1 PSUs 0.00 0.00 0.00 0.00 0.00 2 FIs 0.00 0.00 0.00 0.00 0.00 3 Banks 45.00 45.00 0.00 0.00 0.00 4 Private Corporate 0.00 0.00 0.00 0.00 0.00 5 Subsidiaries/Joint Ventures 0.00 0.00 0.00 0.00 0.00 6 Others 20.28 0.00 0.00 20.28 20.28 7 Provisions held 0.00 0.00 0.00 0.00 0.00 towards depreciation Total 65.28 45.00 0.00 20.28 20.28

Note: Subscription to Special Rural Housing Debentures of ARDBs of`` 13.13 Crore (PY 20.28 Crore), which are in the nature of deemed advances, are classified as investments and is shown under 'Shares of other institutions'.

B. Non-performing investments (` in Crore) Particulars 2013-2014 2012-2013 Opening balance 0.53 0.53 Additions during the year 0.00 0.00 Reductions during the year 0.00 0.00 Closing balance 0.53 0.53 Total Provisions held 0.53 0.53

36.12 Consolidated Financial Statements: NHB has no subsidiary 36.13 Disclosure on Risk Exposures in Derivatives: a) Qualitative Disclosure

• The Bank has in-place derivative policy approved by the board which permits use of derivative products in line with business goals of the Bank. The policy has delegated powers to enter into swaps only at very senior level. • Counter party exposure limits are within the overall limits set for each counter party. The credit equivalent of swaps are computed as per current exposure method as prescribed by RBI. • The Bank has the necessary infrastructure where the functions are well defined i.e. Front Office, Back Office & Mid Office. • The position of the swaps is continuously monitored. ALCO reviews the position on a weekly basis; the valuations of the outstanding positions are monitored on a monthly basis. Further, the Board is apprised of the position on a quarterly basis including the valuation of the swaps. • The Bank uses financial derivative transactions predominantly for hedging its assets/liabilities and for reducing cost. The Bank currently deals only in plain vanilla over-the-counter (OTC) interest rate and currency derivatives, for managing interest rate risks. The Bank shall use such benchmarks where pricing is transparent and that are permitted by RBI. • The interest exchanged on the swaps is accounted on an accrual basis. b) Quantitative Disclosure (` in Crore) Sl. Particulars Currency Derivatives Interest Rate Derivatives No. 2013-14 2012-13 2013-14 2012-13 1 Derivatives (Notional Principal Amount) a) For hedging 0.00 0.00 0.00 200.00 b) For trading 0.00 0.00 0.00 0.00 2 Marked to Market Position a) Asset (+) 0.00 0.00 0.00 0.00 b) Liabilities (-) 0.00 0.00 0.00 0.00

244 ANNUAL REPORT 2013-14

3 Credit Exposure 0.00 0.00 0.00 0.00 4 Likely impact of one percentage change in interest rate (100*PV01) a) on hedging derivatives 0.00 0.00 0.00 0.00 b) on trading derivatives 0.00 0.00 0.00 0.00 5 Maximum and Minimum of 100*PV01 observed during the year a) on hedging - Maximum 0.00 0.00 0.00 0.00 - Minimum 0.00 0.00 0.00 0.00 b) on trading - Maximum 0.00 0.00 0.00 0.00 - Minimum 0.00 0.00 0.00 0.00

36.14 Exposures where the FI had exceeded the prudential exposure limits during the year: Nil (Previous Year - Nil)

36.15 Concentration of Deposits, Advances, Exposures and NPAs (` in Crore) 1. Concentration of deposits (public) 2013-14 2012-13 Total Deposits of twenty largest depositors 39.03 53.95 Percentage of Deposits of twenty largest depositors to Total Deposits 14.58% 22.76%

2. Concentration of Advances Total Advances to twenty largest borrowers 34837.20 29250.93 Percentage of Advances to twenty largest borrowers to Total Advances 87.05% 84.42%

3. Concentration of Exposures Total Exposure to twenty largest borrowers /customers 35497.24 29282.60 Percentage of Exposure to twenty largest borrowers/customers to Total Exposure on borrowers/customers 84.41% 83.07%

4. Concentration of NPAs Total Exposure to top four NPA Accounts 183.70 183.55

36.16 Sector-wise NPAs: Sector Percentage of NPAs to Total Advances in that Sector 2013-14 2012-13 1. Agriculture & Allied activities Nil Nil 2. Industry (Micro & Small, Medium & Large) Nil Nil 3. Services Nil Nil 4. Personnel Loan Nil Nil

Note: Bank's total exposure is towards housing sector and NPAs as on 30.06.2014 was` 184.79 crores.

245 ANNUAL REPORT 2013-14

36.17 Movement of NPAs (` in Crore) Particulars 2013-2014 2012-2013 Gross NPAs (Opening Balance) 184.05 3.56 Additions (Fresh NPAs) during the year 0.92 180.62 Sub-total (A) 184.97 184.18 Less: (I) Upgradations 0.00 0.00 (ii) Recoveries (excluding recoveries made from upgraded accounts) 0.18 0.13 (iii) Write-offs 0.00 0.00 Sub-total (B) 0.18 0.13 Gross NPAs (Closing Balance) (A - B) 184.79 184.05

36.18 Overseas Assets, NPAs and Revenue (` in Crore) Particulars 2013-2014 2012-2013 Total Assets Nil Nil Total NPAs Nil Nil Total Revenue Nil Nil

36.19 Off-balance Sheet SPVs sponsored (which are required to be consolidated as per accounting Norms (` in Crore) Name of SPV sponsor Domestic Overseas Nil Nil

36.20 Sale of Investments held under Held to Maturity (HTM) Category : Nil (PY-Nil) 36.21 Customers complaints received, disposed off and pending for the year: Nil (PY-Nil) Schedule I to XV form an integral part of accounts. Signatures on schedules I to XV for identification.

Amit Sinha K. Chakravarthy R. S. Garg Regional Manager Deputy General Manager Executive Director

M. Mustafa Chairman & Managing Director

Directors Dr. Santosh Chandra Panda Dr. Neelima Risbud H. R. Khan Alok Tandon

As per our attached Report of even date For V. K. VERMA & Co. Chartered Accountants Firm No. 000386N

Vivek Kumar Partner

New Delhi, August 8, 2014 Membership No. 503826

246 ANNUAL REPORT 2013-14

NATIONAL HOUSING BANK ANNUAL ACCOUNTS 2013-14 (July, 2013 To June, 2014) (SPECIAL FUND)

247 ANNUAL REPORT 2013-14

National Housing Bank Slum Improvement and Balance Sheet Previous Year Liabilities Current Year (` in Crore) (` in Crore) 61.82 1. Special Fund (Slum Improvement and Low Cost Housing Fund) 61.82 2. Reserves: 43.53 (i) Special Reserve u/s 36(1)(viii) of Income Tax Act, 1961 45.74 3.00 (ii) Investment Fluctuation Reserve 3.00 250.62 (iii) Reserve Fund -VDS 262.69 311.43 3. Profit & Loss Account: 235.88 Balance as per last Balance Sheet 0.00 14.74Add: Profit transferred from the Profit and Loss A/c 15.99 15.99 250.62 Less: Transfer to Reserve Fund -VDS 15.99 0.00 4. Current Liabilities and Provisions: 69.99 (i) Provision for Income Tax 79.34 1.30 (ii) Provision for Standard Assets 1.30 11.21 (iii) Provision for Bad and Doubtful Debts u/s 36(1) 12.81 (viia)(c) of Income Tax Act, 1961 (23.26) (iv) Amount Payable/(Recoverable) to/from General Fund (5.62) 87.83 9.10 5. Deferred Tax Liability 14.78 427.31 TOTAL 475.86

Profit & Loss Account Previous Year Expenditure Current Year (` in Crore) (` in Crore) 0.00 1. Other Expenditure @ 0.10 2. Provision for Non-Performing Assets 0.22 1.40 3. Provision for Bad and Doubtful Debts u/s 1.60 36(1)(viia)(c) of Income Tax Act, 1961 0.00 4. Deferred Tax 1.76 7.20 5. Provision for Income Tax 9.35 19.34 6. Balance of Profit carried down 18.20 28.04 TOTAL 31.12 4.60 7. Transfer to Special Reserve u/s 36(1)(viii) of Income Tax Act, 1961 2.21 14.74 8. Balance Carried to Balance Sheet 15.99

19.34 TOTAL 18.20

@ amount less than` 50 lakh

Amit Sinha K. Chakravarthy R. S. Garg Regional Manager Deputy General Manager Executive Director

M. Mustafa Chairman & Managing Director

Directors Dr. Santosh Chandra Panda Dr. Neelima Risbud H. R. Khan Alok Tandon

New Delhi, August 8, 2014

248 ANNUAL REPORT 2013-14

Low Cost Housing Fund as at 30th June, 2014 Previous Year Assets Current Year (` in Crore) (` in Crore)

1. Cash and Bank Balances: 0.04 (i) Current Account 0.04 165.00 (ii) Term Deposit with Banks 51.67 51.71 2. Investments(at cost or market value whichever is less): 57.71 Treasury Bills 238.99 3. Loans & Advance: 105.79 Direct Lending 82.09 0.13 Less: Provisions for Non-Performing Assets 0.35 81.75 4. Other Assets: 12.70 (i) Interest Receivable on Bank Deposits 0.18 2.14 (ii) Interest Receivable on Investments 19.16 84.06 (iii) Advance Tax and TDS 84.07 103.41

427.31 TOTAL 475.86 for the year ended 30th June, 2014 Previous Year Income Current Year (` in Crore) (` in Crore) 1. Interest on Loans and Advances and Bank Deposits : 7.70 (i) Loans and Advances 5.84 16.34 (ii) Bank Deposits 5.52 11.36 3.90 2. Income from Investments 19.76 0.08 3. Profit on purchase and sale of Mutual Funds 0.00 0.02 4. Provision for Diminution in the Fair Value of Restructured Accounts 0.00 28.04 TOTAL 31.12 19.34 5. Balance of Profit brought down 18.20

19.34 TOTAL 18.20 Notes forming part of Accounts 1. Balance Sheet and Profit & Loss Account of Special Fund have been drawn in accordance with the provisions of National Housing Bank (Slum Improvement and Low Cost Housing Fund) Regulation, 1993. 2. NHB (Slum Improvement and Low Cost Housing Fund) represent 40% of the amounts deposited by any person voluntarily in accordance with the NHB Voluntary Deposit Scheme (VDS). 3. The Bank do not charge staff expense or other operating expense to Special Fund Account. As per our attached Report of even date For V. K. VERMA & Co. Chartered Accountants Firm No. 000386N Vivek Kumar Partner Membership No. 503826

249 ANNUAL REPORT 2013-14

Senior Executives of National Housing Bank

Shri Arnab Roy Shri R.S.Garg Executive Director Executive Director

Shri Lalit Kumar Shri A.P. Saxena Shri V. Rajan General Manager General Manager General Manager

250 ANNUAL REPORT 2013-14

251 ANNUAL REPORT 2013-14

252