Completion Report Project Number: IND 30204 Loan Number: 1759-IND and 1761-IND October 2008 India: Housing Finance II Project CURRENCY EQUIVALENTS Currency Unit – Indian rupee/s (Re/Rs) At Appraisal At Project Completion National Housing Bank 31 August 2000 30 June 2007 Re1.00 = $0.02179 $0.02455 $1.00 = Rs45.9 Rs40.7 ICICI Bank Limited 31 August 2000 10 October 2007 Re1.00 = $0.02179 $0.02534 $1.00 = Rs45.9 Rs39.5 ABBREVIATIONS ADB – Asian Development Bank ADS – area development society BME – benefit monitoring and evaluation CDS – community development society CFI – community-based financial institution DSCR – debt service coverage ratio HDFC – Housing Development Finance Corporation Limited HF I – Housing Finance Project HF II – Housing Finance II Project HFC – housing finance company HFI – housing finance institution HUDCO – Housing and Urban Development Corporation Limited ICICI Bank – ICICI Bank Limited JLG – joint liability group LIH – low income household MBS – mortgage-backed securitization MFI – microfinance institution NGO – non-government organization NHB – National Housing Bank NHG – neighborhood group PCR – project completion report RBI – Reserve Bank of India RRP – report and recommendation of the President SHG – self help group SML – Share Microfin Limited SPARC – Society for Promotion of Area Resource Centre SPMS – Sri Padmavathy Mahila Abyudaya Sangam SSNS – SPARC Samudaya Nirman Sahayak TA – technical assistance UEIF – Urban and Environmental Infrastructure Facility USAID – United States Agency for International Development NOTES (i) The fiscal year (FY) of NHB ends on 30 June, and of the ICICI Bank ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2007 ends on 30 June 2007 for NHB and 31 March 2007 for ICICI Bank. (ii) In this report, “$” refers to US dollars. Vice President X. Zhao, Operations 1 Director General K. Senga, South Asia Department (SARD) Director T. Kondo, Country Director, India Resident Mission, SARD Team leader S. Singh, Financial Officer, SARD Team members R. Pande, Associate Financial Analyst, SARD N. Saini, Administrative Assistant, SARD CONTENTS Page BASIC DATA i I. BACKGROUND 1 A. History 1 B. Scope of Operations 1 C. Relationship with ADB and Other lenders 2 D. Relevance of Design and Formulation 3 E. Related Technical Assistance 5 II. IMPLEMENTATION 5 A. Lending Policies 5 B. Characteristics of Subloans 6 C. Implementation and Internal Operation of Subprojects 8 D. Operational Performance of the Borrowers 12 E. Borrower’s Financial Performance 13 F. Financial Statements and Ratios 13 G. Covenants 14 H. Performance of the Asian Development Bank 14 III. EVALUATION 15 A. Loan Appraisal 15 B. Implementation 16 IV. ASSESSMENT AND RECOMMENDATIONS 16 A. Evaluation Criteria 16 B. Relevance 17 C. Effectiveness in Achieving Outcome 17 D. Efficiency in Achieving Outcome and Outputs 18 E. Preliminary Assessment of Sustainability 18 F. Overall Assessment 18 G. Impact 19 H. Lessons 20 I. Recommendations 20 APPENDIXES 1. Project Framework 21 2. Community-based Financial Institution and Non-Government Organization Subproject Profiles 28 3. Details of Refinance and Direct Finance under the Project 35 4. Policy and Institutional Action Plan 37 5. Financial Statements of National Housing Bank 40 6. Financial Statements of ICICI Bank Limited 43 7. Status of Compliance with Key Loan Covenants 46 BASIC DATA A. Loan Identification 1. Country India 2. Loan Numbers 1759-IND, 1761-IND 3. Loan Title Housing Finance II Project 4. Borrowers National Housing Bank (NHB) and ICICI Bank Limited (ICICI Bank), the successor of ICICI Limited 5. Amount of Loan $40 million to NHB and $80 million to ICICI Bank 6. Project Completion Report Number PCR:IND 1057 B. Loan Data 1. Appraisal Date Started 5 June 2000 Date Completed 15 June 2000 2. Loan Negotiations Date Started 22 August 2000 Date Completed 25 August 2000 3. Date of Board Approval 21 September 2000 4. Date of Loan Agreements 18 December 2001 5. Date of Loan Effectiveness In Loan Agreements 18 March 2002 Actual NHB 15 February 2002 ICICI Bank 20 December 2002 Number of Extensions for Four ICICI Bank 6. Terminal Date for Commitments In Loan Agreement NHB 14 February 2006 ICICI Bank 19 December 2006 Actual NHB 30 June 2007 ICICI Bank 30 June 2007 Number of Extensions One for NHB and ICICI Bank 7. Closing Date In Loan Agreements 30 June 2007 Revised for ICICI Bank 10 October 2007 Number of Extensions None ii 8. Terms to the Borrower Interest Rate As per the Asian Development Bank’s (ADB’s) market-based loan facility for US dollar loans. Maturity (number of years) 25 years Grace Period (number of years) 5 years Free Limit $2 million Repayment Terms Amortized in semiannual installments over 20 years. 9. Interest Rate for Subloans Project envisaged market-based interest rates. Actual interest rates varied across lending channels. 10. Disbursements a. Dates Borrower Initial Disbursement Final Disbursement Time Interval NHB 27 March 2002 30 June 2007 5 years ICICI Bank 23 December 2002 10 October 2007 5 years Effective Date Original Closing Time Date Interval NHB 15 February 2002 30 June 2007 5 years ICICI Bank 20 December 2002 30 June 2007 4.5 years b. Amount ($ million) Name Last of the Original Revised Amount Amount Borrower Category Allocation Allocation Canceled Disbursed NHB Project 40.00 40.00 32.60 7.40 Expenditure ICICI Bank Project 80.00 80.00 0.00 80.00 Expenditure Total 120.00 87.40 0.00 87.40 iii C. Implementation Data 1. Number of Subloans NHB 2,8301 ICICI Bank 25,730 (Approximately) 2. Sectoral Distribution of Subloans Housing Finance II Project, National Housing Bank Loan (Loan 1759–IND) Component Sector Projected Actual Amount % Amounta % ($ million) ($ million) Part B(ii) Refinancing HFIb Up to $32 No loans to LIHs million more 6.22 88.86 than 80% Part B(iii) Supporting the CFI refinance scheme to 0.00 refinance HFC loans to CFIs for housing subloans c At least $8 At 11.14 Part A (i) Support lending million least 0.78 to LIHs for 20% qualified housing proposals through intermediaries consisting of (i) CFIs and NGOs CFI = community-based financial institution, HFC = housing finance company, HFI = housing finance institution, LIH = low income household, NGO = non-government organization. a This amount excludes front-end fees of $0.4 million. b HFI is a housing finance institution as defined in the NHB Act with the objective of providing finance for housing. c This component was incorporated vide amendment to the loan agreement dated 8 September 2006 and included together with Part B (iii) for satisfying the subloan distribution criteria. Housing Finance II Project, ICICI Bank Limited Loan (Loan 1761–IND) Component Sector Projected Actual Amount Amounta ($ million) ($ million) Part A(i)b Lending directly to LIHs that are 10 8.38 beneficiaries of CFIs or NGOs, or indirectly to LIHs through CFIs or NGOs as intermediaries Part A(ii)c Lending directly to LIHs that are 20 2.47 1 This figure corresponds to the loan of $7 million, which was originally disbursed under part B(ii). Subsequently, $0.78 million was reallocated from part B(ii) to part A(i), under which 576 loans were made. iv Component Sector Projected Actual employees of public and private enterprises, or indirectly to LIHs through public and private enterprises Part A(iii) Lending indirectly to LIHs through 10 0.00 state and local bodies Part B(i) Lending directly to LIHs 40 68.35 CFI = community-based financial institution, LIH = low income household, NGO = non-government organization. a This amount excludes front-end fees of $0.8 million. b This component was revised to include direct lending to beneficiaries of CFIs or NGOs (loan agreement amendment of 3 November 2004). c The condition in the loan agreement restricting direct lending under part A(ii) to $10 million was removed (loan agreement amendment of 3 November 2004). 3. Subloans Above Free Limit ($2 million): Nil 4. Project Performance Report Ratings NHB Ratings Development Implementation Implementation Period Objectives Progress (i) From December 2000 to May 2001 S S (ii) From June 2001 to February 2002 S U (iii) From March 2002 to December 2005 S S (iv) From January 2006 to April 2006 S PS (v) From May 2006 to August 2006 PS S (vi) From September 2006 to January 2008 S S PS = Partly Satisfactory, S = Satisfactory, U = Unsatisfactory. ICICI Ratings Bank Development Implementation Implementation Period Objectives Progress (i) From December 2000 to May 2001 S S (ii) From June 2001 to November 2002 S U (iii) From December 2002 to February 2003 S PS (iv) From March 2003 to December 2007 S S PS = Partly Satisfactory, S = Satisfactory, U = Unsatisfactory. v D. Data on Asian Development Bank Missionsa Housing Finance II Project, National Housing Bank Loan (Loan 1759–IND) No. of No. of Specialization Name of Mission Date Persons Person-Days of Membersb Fact-Finding Mission 18 April–2 May 2000 6 90 c, j, k, Appraisal Mission 5-15 June 2000 3 33 c, j, k Inception Mission 29 April 2002 2 2 b, f Review Mission (1) 7 February 2003 3 3 b, f, k Review Mission (2) 24 April 2003 3 3 b, f, k Review Mission (3) 4 August 2003 2 2 b, f Disbursement 1–2 September and 15 1 3 f Mission September 2003 Review Mission (4) 21–23 October 2003 1 3 b Disbursement 18 and 26–30 October 1 5 f Mission 2003 Review Mission (5) 7 and 13 April 2004 4 8 b, d, f, k Disbursement 22–28 July 2004 1 7 f Mission Mid-term Review 30 June–8 November 4 7 b, d, f, k Mission 2004 Review Mission (6) 2 February 2006 3 3 b, f, k Review Mission (7) 13 September 2006 2 2 b, f Review Mission (8) 11 April–14 May 2007 4 32 b, h, i, k Project Completion 9–27 May 2008 2 6 b, k Reviewc a The mission details provided here are based on the review of project files.