The Hindu : Business : Corpbank Homes plans merger with parent bank

Online edition of India's National Newspaper
Tuesday, Jul 12, 2005

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Business

Corpbank Homes plans merger with parent bank

Ravi Sharma

Securitisation Act has been a propeller in Corpbank Homes containing NPAs.

BANGALORE: Faced with mounting non-performing assets (NPAs) and stiff competition in the home loan sector, and in an attempt to synergise its strengths and save infrastructure costs, Corpbank Homes Ltd., a wholly owned subsidiary of the Mangalore headquartered Corporation Bank, has decided to merge itself with its parent company.

He said Corpbank Homes would "become a healthy institution" with NPAs of around 3 per cent by the time the actual merger with its parent took place. Citing a non-adherence to housing loan norms and trading in unconventional markets (advancing money for sites, furniture and the like) after charging a small premium as the reason for the mounting NPAs, the officials said that "now onwards advances would only be made in conventional markets".

For Corporation Bank, the merger will mean a reduction in infrastructure costs since the bank has anyway been doing the same work that its subsidiary has been doing. Officials point out that reduced infrastructure costs and a lower NPA would mean that the bank could offer home loans at interest rates, which are at least a few percentage points lower than those prevailing at other banks.

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