4.6 Provisions and Contingent Liabilities
Provisions involving substantial degree of estimation in
measurement are recognised when the Company has a
present obligation (legal or constructive), as a result of
past events, and it is probable that an outflow of resources,
that can be reliably estimated, will be required to settle
such an obligation.
The amount recognised as a provision is the best estimate of
the consideration required to settle the present obligation
at the balance sheet date, taking into account the risks and
uncertainties surrounding the obligation. When a provision
is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value
of those cash flows (when the effect of the time value of
money is material).
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is
virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.
The expense relating to a provision is presented in the
Statement of Profit and Loss net of any reimbursement.
If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability.
When discounting is used, the increase in the provision
due to the passage of time is recognised as a finance cost.
A Contingent Liability is a possible obligation that arises
from past events and the existence of which will be
confirmed only by the occurrence or non-occurrence of
one or more uncertain future events not wholly within the
control of the company or a present obligation that arises
from past events that may, but probably will not, require
an outflow of resources.
Both provisions and contingent liabilities are reviewed
at each Balance Sheet date and adjusted to reflect the
current best estimates. Contingent Liabilities are not
recognised but are disclosed in the notes. A contingent
asset is disclosed in the Financial Statements, where an
inflow of economic benefits is probable.
Onerous contracts
Present obligations arising under onerous contracts are
recognised and measured as provisions. An onerous
contract is considered to exist where the Company has
a contract under which the unavoidable costs of meeting
the obligations under the contract exceed the economic
benefits expected to be received from the contract.
4.7 Investment in Subsidiaries and Associates
Investment in subsidiaries and associates are recognized
and carried at cost. Where the carrying amount of an
investment is greater than its estimated recoverable
amount, it is written down immediately to its recoverable
amount and the difference is transferred to the Statement
of Profit and Loss. On disposal of investment, the
difference between the net disposal proceeds and the
carrying amount is charged or credited to the Statement
of Profit and Loss.
4.8 Assets held for sales
To mitigate the credit risk on financial assets, the Company
seeks to use collateral, where possible as per the powers
conferred on the HFC under SARFAESI act.
In the normal course of business, the Company does not
physically repossess properties but engages external
agents to recover funds, generally at auction, to settle
outstanding debt. Any surplus funds are returned
to the customers.
As a result of this practice, the properties under legal
repossession processes are not recorded on the balance
sheet and not treated as non-current assets held for sale.
4.9 Hedge Accounting
The Company uses derivative instruments to manage
exposures to interest rate and foreign currency risks.
The hedging transactions entered into by the Company
is within the overall scope of the Derivative Policy
and within the Risk Management framework of the
company as approved by the Board from time to time
and for the risks identified to be hedged in accordance
with the same policies. All derivative contracts are
recognised on the Balance Sheet and measured at fair
value. Hedge accounting is applied to all the derivative
instruments as per Ind AS 109. Hedge effectiveness is
ascertained periodically on a forward looking basis and is
reviewed at each reporting period. Hedge effectiveness is
measured by the degree to which changes in the fair value
or cash flows of the hedged item that are attributed to
the hedged risk are offset by changes in the fair value or
cashflows of the hedging instrument.
Hedges that meet the criteria for hedge accounting are
accounted for, as described below:
Fair Value Hedges
Fair value hedge is a hedge of the exposure to changes in
fair value of a recognized asset or liability or unrecognized
commitment, or a component of any such item, that is
attributable to a particular risk and could affect profit or
loss. The cumulative change in the fair value of a hedging
derivative is recognised in the Statement of Profit and
Loss in net gain on fair value changes. Meanwhile, the
cumulative change in the fair value of the hedged item is
recorded as part of the carrying value of the hedged item
in the Balance Sheet and is also recognized as net gain
on fair value changes in the Statement of Profit and Loss
. The Company classifies a fair value hedge relationship
when the hedged item (or group of items) is a distinctively
identifiable asset or liability hedged by one or a few
hedging instruments. The financial instruments hedged for
interest rate risk in a fair value hedge relationship is fixed
rate debt issued and other borrowed funds. If the hedging
instrument expires or is sold, terminated or exercised, or
where the hedge no longer meets the criteria for hedge
accounting, the hedge relationship is discontinued
prospectively. If the relationship does not meet hedge
effectiveness criteria, the Company discontinues hedge
accounting from the date on which the qualifying criteria
are no longer met. For hedged items recorded at amortised
cost, the accumulated fair value hedge adjustment to the
carrying amount of the hedged item on termination of
the hedge accounting relationship is amortised over the
remaining term of the original hedge using the recalculated
EIR method by recalculating the EIR at the date when the
amortisation begins. If the hedged item is derecognised,
the unamortised fair value adjustment is recognised
immediately in the Statement of Profit and Loss.
Cash Flow Hedges
Cash flow hedge is a hedge of the exposure to variability
in the cash flows of a specific asset or liability, or of a
forecasted transaction, that is attributable to a particular
risk. It is possible to only hedge the risks associated with
a portion of an asset, liability, or forecasted transaction,
as long as the effectiveness of the related hedge can be
measured. The accounting for a cash flow hedge will be
to recognize the effective portion of any gain or loss in
Other Comprehensive Income (OCI), and recognize the
ineffective portion of any gain or loss in Finance cost in the
Statement of Profit and Loss. When a hedging instrument
expires, is sold, terminated, exercised, or when a hedge
no longer meets the criteria for hedge accounting, any
cumulative gain or loss that has been recognised in OCI
at that time remains in OCI and is recognised when the
hedged forecast transaction is ultimately recognised in the
Statement of Profit and Loss. When a forecast transaction
is no longer expected to occur, the cumulative gain or loss
that was reported in OCI is immediately transferred to the
Statement of Profit and Loss.
Interest rate benchmark reforms:
Hedging relationships that are directly affected by interest
rate benchmark reform gives rise to uncertainties about:
a) the interest rate benchmark (contractually or
non-contractually specified) designated as a
hedged risk; and/or
b) the timing or the amount of interest rate
benchmark-based cash flows of the hedged item or
of the hedging instrument.
This may adversely affect the existing hedging relationships
so long as the uncertainties exist. In order to provide relief
to such hedging relationships the accounting standard Ind
AS 109 provides for some relief measures which should be
mandatorily applied for such cases.
Accordingly, the Company applies the relief by
assuming the following:
1. that the interest rate benchmark on which the
hedged cash flows are based is not altered as a
result of the reform.
2. when performing prospective assessments, the
Company assumes that the interest rate benchmark
on which the hedged item, hedged risk and/or
hedging instrument are based is not altered as a
result of the interest rate benchmark reform.
3. for hedges of a non-contractually specified benchmark
component of interest rate risk, the Company applies
the separately identifiable requirement only at the
inception of such hedging relationships.
As per the requirements of IND AS, the Company
shall cease applying the aforesaid exceptions when:
a) the uncertainty arising from interest rate
benchmark reform is no longer present with
respect to the timing and the amount of the
interest rate benchmark-based cash flows; or
b) the hedging relationship is discontinued,
whichever is earlier.
RECENT INDIAN ACCOUNTING STANDARDS (IND AS)
Ministry of Corporate Affairs ("MCA") notifies new standards
or amendments to the existing standards. There is no such
notification which would have been applicable from April 1, 2024.
Wherever there are any regulatory or statutory changes
applicable in respect of the above policy, the same would
automatically be effective and would become part of this policy
with immediate effect.
Note 15.1
Secured by a negative lien on the assets of the Company (excluding the company's current and future receivables and book-debt
of whatsoever nature of the Company on which a first pari-pasu floating charge by way of hypothecation to secure the borrowings
of the company outstanding as on 31st March 2015 and the unavailed sanctions of the term loans, cash credit and refinance as on
31st March 2015), with a minimum asset cover of 100%. Further the Company shall be entitled to dispose of, transact or otherwise
deal, in the ordinary course of business upto 5% of the Specific Assets, including by way of a securitization transaction and as may
be required under any law, regulations, guidelines or rules. Subject to maintenance of Asset Cover, as may be applicable and in
the normal course of business, the Company may without the consent/approval of the Trustee/Debenture Holder(s)/Beneficial
Owner(s)/creditors be entitled to make further issue(s) of Debentures, raise further loans and advances and/or avail further deferred
payment guarantees or other financial facilities from time to time from any persons/bank/financial institution/body corporate/
any other agency.
Secured by way of Negative Lien on the Assets, to the extent of Asset Cover, without any encumbrance in favour of the Debenture
Trustee except to the extent of the charge created in favour of its depositors of the Company pursuant to the regulatory requirement
under Section 29B of the NHB Act.
However, the Company shall, from time to time, be entitled to create any charge, mortgage, pledge, security interest, encumber or
create lien on its Assets, subject to maintenance of Asset Cover, except to the extent of charge created in favour of its depositors
pursuant to the regulatory requirement under Section 29B of the NHB Act or as may be required under any law, regulation,
guidelines or rules.
Secured by a negative lien on the assets of the Company (excluding the company's current and future receivables and book-debt
of whatsoever nature of the Company on which a first pari-pasu floating charge by way of hypothecation to secure the borrowings
of the company outstanding as on 31st March 2015 and the unavailed sanctions of the term loans, cash credit and refinance as on
31st March 2015), with a minimum asset cover of 100%. Further the Company shall be entitled to dispose of, transact or otherwise
deal, in the ordinary course of business upto 5% of the Specific Assets, including by way of a securitization transaction and as may
be required under any law, regulations, guidelines or rules. Subject to maintenance of Asset Cover, as may be applicable and in
the normal course of business, the Company may without the consent/approval of the Trustee/Debenture Holder(s)/Beneficial
Owner(s)/creditors be entitled to make further issue(s) of Debentures, raise further loans and advances and/or avail further deferred
payment guarantees or other financial facilities from time to time from any persons/bank/financial institution/body corporate/
any other agency.
Secured by way of Negative Lien on the Assets, to the extent of Asset Cover, without any encumbrance in favour of the Debenture
Trustee except to the extent of the charge created in favour of its depositors of the Company pursuant to the regulatory requirement
under Section 29B of the NHB Act.
However, the Company shall, from time to time, be entitled to create any charge, mortgage, pledge, security interest, encumber or
create lien on its Assets, subject to maintenance of Asset Cover, except to the extent of charge created in favour of its depositors
pursuant to the regulatory requirement under Section 29B of the NHB Act or as may be required under any law, regulation,
guidelines or rules.
"Secured by a negative lien on the assets of the Company (excluding the company's current and future receivables and book-debt
of whatsoever nature of the Company on which a first pari-pasu floating charge by way of hypothecation to secure the borrowings
of the company outstanding as on 31st March 2015 and the unavailed sanctions of the term loans, cash credit and refinance as on
31st March 2015), with a minimum asset cover of 100%. Further the Company shall be entitled to dispose of, transact or otherwise
deal, in the ordinary course of business upto 5% of the Specific Assets, including by way of a securitization transaction and as may
be required under any law, regulations, guidelines or rules. Subject to maintenance of Asset Cover, as may be applicable and in
the normal course of business, the Company may without the consent/approval of the Trustee/Debenture Holder(s)/Beneficial
Owner(s)/creditors be entitled to make further issue(s) of Debentures, raise further loans and advances and/or avail further deferred
payment guarantees or other financial facilities from time to time from any persons/bank/financial institution/body corporate/
any other agency.
Secured by way of Negative Lien on the Assets, to the extent of Asset Cover, without any encumbrance in favour of the Debenture
Trustee except to the extent of the charge created in favour of its depositors of the Company pursuant to the regulatory requirement
under Section 29B of the NHB Act.
However, the Company shall, from time to time, be entitled to create any charge, mortgage, pledge, security interest, encumber or
create lien on its Assets, subject to maintenance of Asset Cover, except to the extent of charge created in favour of its depositors
pursuant to the regulatory requirement under Section 29B of the NHB Act or as may be required under any law, regulation,
guidelines or rules.
Nature and purpose of each reserve
Securities Premium Reserve
"Securities Premium Reserve" is used to denote the Share premium received on issue of shares. The reserve can be utilised only for
limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
Cash Flow Hedge Reserve
It represents the effective portion of cumulative gains/(losses) arising on revaluation of the derivative instruments designated as
cash flow hedges through OCI.
Special Reserve - I:
Special Reserve - I has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable
profits of the Company. The amounts of Special Reserve account represent, the reserve created in terms of the provision of Section
36(1)(viii) read together with the proviso thereof, from time to time. Special Reserve No. I relates to the amounts transferred up to
the Financial Year 1996-97 (Assessment Year 1997-98) when the word 'created' only was used in the said section and not 'created
and maintained'. Admittedly, the position has changed after the amendment made in Section 36(1)(viii) by the Finance Act 1997 with
effect from Assessment year 1998-99, when the mandatory requirement of 'maintaining' the special reserve created was inserted.
Accordingly, it was interpreted that the Special Reserve created up to Assessment Year 1997-98 need not be 'maintained'. As a
logical corollary, it is construed that up to Assessment Year 1997-98, the amounts carried to special reserve ought to be understood
as amounts created by transferring to the credit of Special Reserve from time to time.
Special Reserve - II:
Special Reserve - II has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable
profits of the Company transferred from Financial Year 1997-98 (Assessment Year 1998-99). In the F.Y. 2024-25'1299.99 Crore (F.Y.
2023-24'1309.99 Crore) has been transferred to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act, 1961.
Statutory Reserves under Section 29C (Regulatory Capital) of NHB:
As per Section 29C of the National Housing Bank Act, 1987 (the 'NHB Act'), the Company is required to transfer atleast 20% of its
net profits every year to a reserve before any dividend is declared and no appropriation from the statutory reserves except for the
purpose as may be specified by NHB from time to time and every such appropriation shall be reported to the NHB. For this purpose,
any Special Reserve created by the Company under Section 36(1)(viii) of the Income tax Act, 1961 is considered to be an eligible
transfer under Section 29C of the NHB Act, 1987 also. The Company has transferred a sum of ' 1299.99 Crore for F.Y. 2024-25 (F.Y.
2023- 24'1309.99 Crore) to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act, 1961 and ' 1.00 lakh for F.Y.
2024- 25 (F.Y. 2023-24'1.00 lakh) to Statutory Reserve under section 29C of the NHB Act, 1987.
General Reserve:
Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified
percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution
in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than
the total distributable results for that year. Consequent to introduction of Companies Act 2013, the requirement to mandatorily
transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred
to the general reserve can be utilised only in accordance with the specific requirements of Companies Act, 2013. However, since
the Company utilises the deduction available to Housing Finance Companies registered with National Housing Bank as provided in
Section 36(1)(viii) of the Income tax Act, 1961, wherein the proviso of the Section stipulates that the amount Carried to such reserve
account from time to time exceeds twice the amount of the paid up share capital and general reserves of the Company, the rebate
is restricted to the twice of the aggregate of paid up capital and the general reserve. Therefore, the Company transfers funds to
General Reserve in order to avail the full benefit of Section 36(1)(viii). For the year, the Company has transferred an amount of
' 1000 Crore to General Reserve (F.Y. 2023-24'1000 Crore).
Impairment Reserve:
The Reserve Bank of India (RBI) issued a notification on 13 March 2020 stating that NBFCs should simultaneously maintain asset
classification and compute provisions as per extant prudential norms on income recognition, asset classification and provisioning
(IRACP), including borrower-/beneficiary-wise classification, provisioning for standard and restructured assets, and NPA ageing.
In case where impairment allowance under Ind AS 109 is lower than the provisions required as per IRACP, the difference should be
appropriated from net profit or loss after tax to a separate 'impairment reserve'. The balance in the 'impairment reserve' shall not
be reckoned for regulatory capital. Further, no withdrawals shall be permitted from this reserve without prior permission from the
Department of Supervision, RBI. The requirement for 'impairment reserve' shall be reviewed, going forward.
Internal Committee
Risk Management Committee and Operational Risk Group (RMC & ORG)
Company has an internal Risk Management Committee and Operational Risk Group whose major function include review of
Risk Registers submitted monthly by all departments. It comprises of HODs of Risk Management, Finance, Marketing, Credit
Monitoring, IT, and any other member as nominated by MD & CEO of the Company. A list of functions performed by RMC &
ORG is given below -:
• Review of Risk Management Policy
• Review of monthly Risk Register submitted by various depts.
• Review of the current status on the outer limits prescribed in the Risk Policy and submitting the report to RMCB & Board
• Assessment of risks in the Company and suggesting control/mitigation measures thereof
The Company has exposure to following risks arising from the financial instruments.
35.4.1 Liquidity Risk
Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial
liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the
Company might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the
cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset
positions is not available to the Company on acceptable terms. To limit this risk, management has arranged for diversified
funding sources and adopted a policy of managing assets with liquidity in mind and monitoring future cash flows and liquidity
on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk.
In addition, the Company is also maintaining Liquidity Coverage Ratio (LCR) from 01st December, 2021 as prescribed by the
regulator. (As per notification no. RBI/2020-21/60 DOR.NBFC (HFQ.CCNo.118/03.10.136/2020-21 dated 22nd October, 2020)
Housing Finance being the core business, maintaining the liquidity for meeting the growth in the business as also to honor the
committed repayments is the fundamental objective of the Asset Liability Management (ALM) framework. Investments, including
investments as a part of liquid asset requirement, also forms part of ALM requirement and it is imperative to constantly monitor
the liquidity of the investments to achieve the core objective.
Internal Control Process & Liquidity Management
Being in the business of Housing Loans, funds are required to be raised by the Company ahead of loan disbursements so that
there is no liquidity crunch. Funds are required to be raised not only for the incremental housing loan assets but also for meeting
the committed/due repayments of the earlier borrowings and/or Interest payments on the borrowings. Funds therefore
are raised with a reasonable cushion over and above the committed repayments, committed disbursements and unutilized
sanctions in pipeline and the expected business targets.
The Company ensures that funds are available from various investor pools and banks. Liquid funds are available in the form of
Non-Convertible Debentures and other Market Instruments, Bank Loans and Refinance from NHB. In case of Public Deposits
accepted by the Company, a prescribed percentage (as defined by NHB from time to time) is to be invested in approved securities
in terms of Liquid Asset Requirement (as per notification no. RBI/2020-21/73 DOR.FIN.HFC.CC.No.120/03.10.136/2020-21).
On the assets side, the Company has loan products broadly classified under individual retail loans and project finance loans
with varying repayment structures depending upon the nature of product.
The liquidity is managed at the Corporate Office of the Company with Back Offices providing their liquidity requirements.
The surplus funds available with the Back Offices are pooled and funds from the market are arranged for the Back Offices
having a deficit of funds. Only surplus funds arrived at after deducting the committed/confirmed outflows (including projected
disbursements of loans) from the available resources - both from internal accretions as well as borrowed funds, would be
considered as Surplus available for Investment in approved instruments on day-to-day basis. The Company can place surplus
funds in Fixed Deposits with selected Scheduled / Commercial / Foreign Banks and / or Financial Institutions within overall
exposure limit fixed for each Bank / FI from time to time by the Board. Considering the market risk and the mark-to-market
requirements of the debt mutual funds, currently Company is making Investments only in liquid and overnight schemes of
mutual funds. Exposure limits for each Investment instrument is approved by the Board and reviewed from time to time as per
the requirements.
35.4.2 Credit Risk
Credit Risk refers to the risk arising out of the default by the counterparty on its contractual obligations resulting in financial loss to
the Company. The Company has defined Loan selection principles for establishing creditworthiness of the counterparties and criteria
for determining the quantum of loan. The Company has adopted a policy of dealing with creditworthy counter parties and obtaining
sufficient collateral as a means of mitigating the risk of financial loss from defaults. The exposure is continuously monitored.
The carrying amount of loans as at March 31, 2025 is ' 3,07,744.85 crore (F.Y. 2023-24'2,86,859.87 crore) which best represent
the maximum exposure to credit risk, the related Expected credit loss amount to ' 4899.01 crore (F.Y. 2023-24'6,270.08 crore).
The Company has right to sell the collateral in case borrower defaults. The carrying amount of loans as at March 31, 2025 includes
' 13.20 crore towards Loans to Staff, Loans against Public Deposit and Finance Lease Receivables. (F.Y.2023-24'15.48 crore).
35.4.2.1 Credit Risk Mitigation measures
Independent internal legal and technical evaluation team in the Company makes credit decisions more robust and in line to manage
collateral risk. The in-house Credit team conducts a credit check and verification procedure on each customer, ensuring consistent
quality standards to minimize future losses. To review the adherence to laid down policies and quality of appraisal, Company's
independent internal audit team conducts a regular review of files on a sample basis. A dedicated collection and recovery team
manages lifecycle of transactions and monitors the portfolio quality.
Credit Norms: - Certain credit norms and policies are being followed by the Company to manage credit risk, including a standard
credit appraisal policy based on customer credit worthiness. These criteria change between loan products and typically include
factors such as profile of applicant, income and certain stability factors such as the employment and dependency detail, other
financial obligations of the applicant, Loan to value and the loan-to-cost ratio. Standardized credit approval process including a
comprehensive credit risk assessment is in place which encompasses analysis of relevant quantitative and qualitative information to
ascertain the credit worthiness of the borrower.
The Credit Policy defines parameters such as Borrower's ability to pay, Reputation of Employer, Nature of employment/
Self-employed, Qualification of Applicants, Stability of Residence, Family size and dependence on Applicants income, Insufficient
sales proceeds to pay the dues in case of Project Loans due to project slowdown etc. to ensure consistency of credit quality.
Retail lending:
For retail lending, credit risk management is achieved by considering various factors like:
- Assessment of borrower’s capability to pay - a detailed assessment of borrower's capability to pay is conducted.
The approach of assessment is laid down in the credit policy of the Company. Various factors considered for assessment are
credit information report, analysis of bank account statement and valuation of property.
- Security cover - Analysing the value of the property which is offered as security for the loan is essential for the overall
underwriting of the loan. It is essential that it is valued before the disbursement of loan to arrive at a clear idea about its cost,
valuation, marketability and loan to property ratio.
- Additional Security - Additional Security can be by way of pledge of acceptable Additional Collaterals such as LIC Policies,
FDs or other immovable properties, etc. is considered. This is taken depending on nature of loan proposal and amount
of risk involved.
- Geographical region - The Company monitors loan performance in a particular region to assess if there is any stress due to
natural calamities etc. impacting the performance of the loan in a particular geographic region.
Project & High Value lending:
For project & high value lending, credit risk management is achieved by considering various factors like:
- Promoter’s strength - a detailed assessment of borrower's capability to pay is conducted. Various factors considered for
promoter's assessment are the financial capability, past track record of repayment, management and performance perspective.
- Credit information report - It is very essential to check the Creditworthiness of an Applicant & the Credit History of Borrower
for Consumer or Commercial Loans. The Company uses this Report for taking a Decision on Credit Sanction by getting details
of the Credit History of a Borrower. For Project Loans, reports from independent institutions are referred so as to get the
marketability report of the project and its neighbourhood analysis.
- Security cover - Analysing the value of the property which is offered as security for the loan is essential for the overall
underwriting of the loan. With respect to project loans, the main security taken is underlying land and structure there on.
Technical appraisals are conducted to establish the life, soundness, marketability and value of the security.
- Additional Security - Additional Security is taken depending on nature of loan proposal and amount of risk involved. In some
cases, the hypothecation of receivables from the loan is taken. The Negative lien is marked on the flats in the project to the
extent decided by the Competent Authority as per merits of the case. The Company endeavours to maintain the security cover
approved by the Competent Authority as per the merit of the case. Personal Guarantee of promoter directors / corporate
guarantee of Company is also obtained as Security on case-to-case basis. In some cases, the Additional Collateral in the form
of Fixed Deposits are also accepted. In case of Higher Risk, Debt Service Recovery Account is also maintained. The Charge on
the security / Additional Collateral security is also registered in Central Registry / ROC.
- Geographical region - The Company monitors loan performance in a particular region to assess if there is any stress due to
natural calamities etc. impacting the performance of the loan in that geographic region.
Company is having robust system for risk identification and risk assessment of Project & High value Corporate Loans. The Company
manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for
geographical and industry concentrations, and by monitoring exposures in relation to such limits.
Derivative financial instruments:
Interest rate swaps
The exposure of the Company to Derivatives contracts is in the nature of Interest Rate Swap and Currency Swaps to manage risk
associated with interest rate movement and fluctuation in currency exchange rate.
Derivative policy of the Company specifies the exposure norms with respect to single counterparty and the total underlying amount
at the time of entering into the new derivative contract.
The Asset Liability Management Committee (ALCO) of the Company oversees efficient management of risk associated with
derivative transactions. Company identifies, measures, monitors the exposure associated with derivative transaction. For effective
mitigation of risk it has an internal mechanism to conduct regular review of the outstanding contracts which is reported to the ALCO
& Risk Management Committee of the Board which in turn reports to the Board of Directors.
The gain, if any realized on early termination of swap is amortized over the balance tenor of the swap or underlying liability whichever
is less. Loss if any on early termination is charged to revenue in the same year. The carry difference, between coupon rate liability
and the swap contract rate is accounted quarterly on accrual basis.
35.4.2.2 Collateral and other credit enhancements
With respect to loan cases the main security taken is underlying property mortgaged by the borrower. Apart from the main security
additional collaterals are also sought depending upon merits of the case. In some cases, the hypothecation of receivables for the
loan is also taken.
The Company after exploring all the possible measures, initiates action under Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) against the mortgaged properties as a last resort to recover.
Company follows the due procedure as laid down in the SARFAESI Act 2002 and accordingly takes the possession of the properties
for its logical conclusion. The Company initiates insolvency proceedings against Corporate borrowers in default under IBC code
2016, wherever deemed necessary.
As the procedure involved under SARFAESI is to be followed in a time-bound manner, different loan accounts will be at various
stages of SARFAESI proceedings.
The properties taken under possession through SARFAESI Act by the Company and held such properties for disposal as on
31.03.2025 included in loan portfolio amounting to ' 747.13 crore (FY 2023-24'658.31 crore).
35.4.2.3 Impairment Assessment
The Company applies general approach to provide for credit losses prescribed by Ind AS 109, which provides to recognise 12-months
expected credit losses where credit risk has not increased significantly since initial recognition and to recognise lifetime expected
credit losses for financial instruments for which there has been significant increase in credit risk since initial recognition considering
all reasonable present and forward looking information.
Definition of Default
The Company considers a financial instrument as defaulted when the borrower becomes 90 days past due on its contractual
payments. Such instruments are considered as Stage 3 (credit-impaired) for ECL calculations.
The three stages reflect the general pattern of credit deterioration of a financial instrument. The differences in accounting between
stages relate to the recognition of expected credit losses and the calculation and presentation of interest revenue.
Stage wise Categorisation of Loan Assets
The company categorises loan assets into stages based on the Days Past Due status:
- Stage 1: [0-30 days Past Due] it represents exposures where there has not been a significant increase in credit risk since initial
recognition and that were not credit impaired upon origination. The Company uses the same criteria mentioned in the standard
and assume that when the days past due exceeds '30 days', the risk of default has increased significantly. Therefore, for those
loans for which the days past due is less than 30 days, one year default probability is used.
- Stage 2: [31-90 days Past Due] The Company collectively assesses ECL on exposures where there has been a significant
increase in credit risk since initial recognition but are not credit impaired. For these exposures, the Company recognises as a
collective provision, a lifetime ECL (i.e. reflecting the remaining lifetime of the financial asset).
- Stage 3: [More than 90 days Past Due] The Company identifies, both collectively and individually, ECL on those exposures that
are assessed as credit impaired based on whether one or more events that have a detrimental impact on the estimated future
cash flows of that asset have occurred. The Company use the same criteria mentioned in the standard and assume that when
the days past due exceeds '90 days', the default has occurred.
Loan Portfolio:
Depending on the nature of the financial instruments and the credit risk information available for particular groups of financial
instruments, an entity may not be able to identify significant changes in credit risk for individual financial instruments before they
become past due. The loans are backed by sufficient margin of underlying security which absorbs the associated risks. Hence, the
Company has performed the assessment of significant increases in credit risk on a collective basis by considering information that
is indicative of significant increases in credit risk on groups of financial instruments.
For the purpose of determining significant increases in credit risk and recognising loss allowance on a collective basis, the Company
has grouped financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that
is designed to enable significant increase in credit risk identified on a timely basis. the company has grouped portfolio based on
borrower type Individuals (Salaried / Non-Individuals) and based on the purpose of the loan Housing loans / Non-housing loans /
Project and Corporate lending.
35.4.2.4 ECL Model and Assumptions considered in the ECL model
The Company has through its previous experience estimated the probability of default on loans. Thus it is seen that receivable for
an account moves through different delinquency stages every month. For example, an account in the "Regular" state this month will
continue to be in the "Regular" state next month if a payment is made by the due date and will be in the "30 days past due” state if
no payment is received during that month.
Further, focus is on maintaining the progression and timing of events in the path from "Regular" to "Defaulted". For example, an
account in the "Regular" state doesn't suddenly become "Defaulted". Instead, an account must progress monthly from the "Regular"
state to the "30 days past due" state to the "60 days past due" state and so on until foreclosure activities are completed and the
collateral assets are sold to pay the outstanding debt.
The transition represents the period-by-period movement of receivables between delinquency classifications or states. The transition
evaluates loan quality and loan collection practice. The loan portfolio for the past years is analysed to arrive at the transition matrix.
Each loan is traced to find out how the loan has performed over such period.
The occurrences of every loan over the past years are considered to arrive at the total transitions happening from different buckets
in the previous month to different buckets in the current month.
Probability of Default
Stage 1 - [No significant increase in credit risk]: the monthly transition matrix is converted into a 12-month transition matrix for
determining the probability of default for those loan accounts on which the risk has not increased significantly from the time the
loan is originated. The Company use the same criteria mentioned in the standard and assume that when the days past due exceeds
'30 days', the risk of default has increased significantly. Therefore, for those loans for which the days past due is less than 30 days,
one-year default probability is considered.
Stage 2 - [Significant increase in credit risk]: The credit risk is presumed to have increased significantly for loans that are more than
30 days past due and less than 90 days past due. For such loans, lifetime default probability is considered. Based on the maturity
date of the loan, the probability of default is arrived at to determine the quantum of the loan that is likely to move into the buckets
'90 days past due' and greater. The monthly transition matrix is used to find out the transition matrix applicable for the loan
considering the maturity date of such loan.
Stage 3 - [Defaulted loans]: As per the standard there is a rebuttable presumption that default does not occur later than when
a financial asset is 90 days past due unless an entity has reasonable and supportable information to demonstrate that a more
lagging default criterion is more appropriate. The definition of default used for these purposes shall be applied consistently to all
financial instruments unless information becomes available that demonstrates that another default definition is more appropriate
for a particular financial instrument. The Company assumed that the default has occurred when a loan moves into '90 days
past due' bucket.
When the loan moves from stage 3 to stage 2 / stage 1 or from stage 2 to stage 1, from an ECL computation perspective there is a
curing period of one quarter on such loans.
Exposure at default
The borrower's ability to raise its exposure as it nears default as well as potential early repayments are both taken into account in the
Exposure at Default (EAD), which represents the gross carrying value of the financial instruments subject to impairment calculation.
Probability of default of the loan that is likely to move into buckets 90 days past due and above over next 12 months. The PD is used
to measure quantum of loan that is likely to move buckets 90 days past due and above over the remaining life of the loan.
Loss given default
The loans are secured by adequate collateral. The present value of such collateral property is considered while calculating the
Expected Credit Loss. The Company initiates recovery process of Non-Performing accounts within the statutory time limit as per
SARFAESI and other applicable laws and accordingly the realizable period has been considered for computing the Present Value of
Collateral. The difference between present value of collateral and EAD is loss given default.
Forward looking information
The assumptions and estimates on the basis of which, the Expected Credit Losses (ECL) of the loan portfolio have been
identified, are primarily based on the historical performance of the loan portfolio, updated to reflect current conditions including
regulatory interventions.
Write off policy
The Company has over the period has established a well-defined Credit Monitoring Mechanism for follow up of the default /
delinquent accounts.
A multi-faceted approach is adopted in Credit Monitoring activities which involves participation of In-House employees as well
as outsourced agencies. Each loan account is analysed based on the causative factors of becoming default and appropriate
follow-up activity is undertaken. In spite of adopting an appropriate follow-up activity, some accounts continue to be delinquent.
Sufficient time, as per law, is given to the borrowers to regularize their repayments and if still the accounts continue to be under the
Non-Performing bracket, legal recourse is adopted.
E. Third Party Risk is the risk arising due to the Company outsourcing some of the business-related activities to third party
service providers. The risk arises because of deviation in the contractual terms and the performance delivered by the vendor.
35.4.6 Regulatory Risk
Regulatory risk is the risk that a change in laws and regulations will materially impact the Company. Changes in law or regulations made
by the government or a regulatory body can increase the costs of operating the business, and/or change the competitive landscape.
Regulatory risk can arise due to change in prudential rules/norms by the regulators viz; NHB, SEBI, RBI etc. In order to mitigate the
effects of same, the Company keeps track of all regulatory changes and quickly adapts to the change.
35.4.7 Strategic Risk
Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper
implementation of decisions, or lack of responsiveness to industry changes. It is the risk to the market share and profitability arising
due to competition.
35.4.8 Currency Risk and mitigation
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company
manages itself against currency risk by taking out foreign currency swaps and converting the exposures into Indian Rupees.
The Company applies cash flow hedge accounting to the foreign currency element of its floating rate dollar-denominated External
Commercial Borrowings and associated cross currency interest rate swaps. As on 31st March 2025, company do not have any
foreign borrowings.
The Company converts ECB into fixed rate Indian Rupee exposures with the floating rate and principal of the hedged item matched
by those of the hedging instrument. The Company considers the hedge as a hedge of more than one risk and does not split the
interest rate from the principal for hedge accounting purposes.
g) The Board of Directors of the Company has disclosed the following on its website:
- Composition of CSR Committee
https://www.lichousing.com/static-assets/pdf/Committees Membership Updated SEPTEMBER 2023.
pdf?crafterSite=lichfl-corporate-website-cms&embedded=true
- CSR Policy (https://www.lichousing.com/policv-codes).
https://www.lichousing.com/static-assets/pdf/Corporate Social Responsibility Policy.
pdf?crafterSite=lichfl-corporate-website-cms&embedded=true
- Projects approved by the Board on their website
https://www.lichousing.com/static-assets/pdf/CSR%20Proiects%20Approved%20FY%202024-25.
pdf?crafterSite=lichfl-corporate-website-cms&embedded=true
52. TRANSFER TO SPECIAL RESERVES
Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the
distributable profits of the Company. Special Reserve No. I relates to the amounts transferred upto the Financial Year 1996-97,
whereas Special Reserve No. II relates to the amounts transferred thereafter. In the current financial year ' 1299.99 crore (F.Y.
2023-24'1309.99 crore) has been transferred to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act,
1961 and an amount of ' 0.01 crore (F.Y. 2023-24'0.01 crore) to Statutory Reserve under Section 29C the NHB Act as per
notification no. RBI/2020-21/73 DOR.FIN.HFC.CC.No.120/03.10.136/2020-21.
As per National Housing Bank's (NHB) circular vide circular NHB(ND)/DRS/Pol. 62/2014 dated 27th May, 2014, the Company
has adjusted the opening balance of reserves for creation of Deferred Tax Liability (DTL) on the Special Reserve as at 1st April,
2014 created under Section 36(1)(viii) of the Income tax Act, 1961.
53. DISCLOSURE REQUIRED BY RESERVE BANK OF INDIA
The following disclosures have been given in terms of Notification no. RBI/2020-21/73 DOR.FIN.HFC.
CC.No.120/03.10.136/2020-21dated February 17, 2021 issued by Reserve Bank of India.
Summary of Significant Accounting Policies
The accounting policies regarding key areas of operations are disclosed as note 1 to 4 to the Standalone Financial Statement
for the year ended March 31, 2025.
1. Advances
Disclosure regarding provisions made for substandard, doubtful and loss assets as per the Prudential Norms contained
in the Notification no. RBI/2020-21/73 DOR.FIN.HFC.CC.No.120/03.10.136/2020-21 dated February 17, 2021 issued by
Reserve Bank of India as amended are as under:
a. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the HFC
As per RBI Directions Housing Finance Companies shall not lend more than 15% of its owned fund to Single borrower
and 25% of its owned fund to any single group of borrowers. The Company has not exceeded prudential exposure limits
during the year. The sanctioned limit or entire outstanding, whichever is higher, shall be reckoned for exposure limit.
54. THE DISCLOSURE ON THE FOLLOWING MATTERS REQUIRED UNDER SCHEDULE III AS AMENDED NOT BEING
RELEVANT OR APPLICABLE IN CASE OF THE COMPANY, SAME ARE NOT COVERED SUCH AS
a. The Company has not traded or invested in crypto currency or virtual currency during the financial year.
b. There is no undisclosed transaction which have not been recorded in the books that has been surrendered or disclosed as
income during the year in the tax assessments under the Income Tax Act,1961.
c. No proceedings have been initiated or pending against the company as the Company does not hold any Benami Property
under the Benami Transactions (Prohibition) Act, 1988.
d. The Company has not been declared wilful defaulter by any bank or financial institution or government or any
government authority.
e. The Company has not entered any scheme of arrangement, which have been approved by the Competent Authority in
terms of sections 230 to 237 of the Companies Act, 2013.
f. No Registration or satisfaction of charges are pending to be filed with ROC.
g. No revaluation of any class of asset is carried out during the year.
h. Fair valuation of Investment property is not applicable to the company, as company doesn't hold any investment property.
i. Company doesn't hold any immovable property in the name of third party.
j. Clause (87) of section 2 of the act read with the Companies (Restriction on number of Layers) Rules, 2017 is not
applicable to company.
k. No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources
or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries”),
with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or
indirectly lend to or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company
("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
l. No funds have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding
Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or
II. The purpose of LCR is to maintain strong liquidity buffer which will promote resilience of HFC's to potential liquidity
disruptions by ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity stress
scenario lasting for 30 calendar days. This will reduce the risk of spill over from any financial stress scenario.
III. LCR = Stock of High-Quality Liquid Assets (HQLAs)/Total Net Cash Outflows over the next 30 calendar days.
Total net cash outflows arrived at after deducting total expected cash inflows (stressed inflows) from total expected
cash outflow (stressed outflows) for the subsequent 30 calendar days. To compute expected cash outflow (stressed
outflows), all expected and contracted cash outflows are considered by applying a stress of 15% and for expected cash
inflows (stressed inflows) of the company is arrived at by considering all expected and contracted inflows by applying
an under-flow of 25%.
The HQLA maintained by company comprises of Government securities held for LCR purpose, Government securities
held for the purpose of Statutory Liquid Ratio (SLR) with a hair-cut of 20% and balances maintained in current accounts.
The Company derived LCR as per guidelines prescribed by RBI. The average LCR maintained for the quarter ended
Mar-24 is 175.34%. For the year ended 31 March 2025, the Company has disclosed the LCR as a simple average calculated
on the basis of daily observations for each quarters of FY 23-24.
* HQLA includes G-Secs held for LCR purpose, G-Secs held for Statutory Liquid Ratio (SLR) with a hair-cut of 20% and Balance maintained in
current accounts.
** Other cash inflows include undrawn borrowing facility and Mutual Fund placements
56. PREVIOUS YEAR NUMBERS HAVE BEEN REGROUPED / RECLASSIFIED, WHEREVER CONSIDERED NECESSARY,
TO CORRESPOND WITH CURRENT YEAR PRESENTATION. THERE ARE NO SIGNIFICANT REGROUPING /
RECLASSIFICATIONS DURING THE YEAR UNDER REPORT
As per our report of even date attached For and on behalf of the Board of Directors
For SGCO & Co. LLP For Khandelwal Jain & Co Siddhartha Mohanty Kashi Prasad Khandelwal T. Adhikari
Chartered Accountants Chartered Accountants Chairman Director Managing Director &
FRN 112081W / W100184 FRN 105049W DIN : 08058830 DIN : 00748523 Chief Executive Officer
DIN : 10229197
Suresh Murarka Shailesh Shah Varsha Hardasani Lokesh Mundhra H. J. Panchariya
Partner Partner Company Secretary CFO General Manager
M. No. 044739 M.No. 033632 ACS No.: 50448 (Accounts)
Place: Mumbai
Date : May 15, 2025
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