Date:19/12/2006 URL: http://www.thehindubusinessline.com/2006/12/19/stories/2006121904710600.htm

Back Allahabad Bank to offer reverse mortgage

M. Ramesh

Open to tie-up with Indian Overseas Bank

New venture
Reverse mortage is a scheme meant for elderly people, where the lender would pay a monthly sum to the borrower against the security of a house.
Allahabad Bank's scheme could well be the first from a public sector bank.

MR A.C. MAHAJAN

Chennai , Dec. 18

Allahabad Bank has secured the approval of its board of directors to come out with a `reverse mortgage' product. "Our people are working on it," Mr A.C. Mahajan, Chairman and Managing Director of the bank, told Business Line soon after the board meeting held here.

Reverse mortgage is a scheme meant for elderly people, where the lender would pay a monthly sum to the borrower against the security of a house. The property would be sold off by the lender and the loan repaid out of the proceeds after the borrower dies.

Very popular in the US, this concept is only now hitting India. While there are some reverse mortgage products in the market, Allahabad Bank's could well be the first from a public sector bank.

No constraints

Mr Mahajan said that the bank faced no resource constraints. "Money is available, but for a price," he noted, adding that the bank had also options such as upper tier-II bonds, preference shares and other hybrid instruments.

Moreover, the bank's investment portfolio is about Rs 20,000 crore, against the minimum SLR requirement of Rs 13,500 crore. There is, therefore, substantial amount of liquidity in the investment book, which could be liquidated for funding credit expansion, Mr Mahajan said.

Possible tie-ups

Asked if the bank would join an `alliance', like the three-way alliance of Indian Bank, Corporation Bank and Oriental Bank of Commerce, Mr Mahajan noted that with 1,300 branches in eastern India, "we are a healthy force to reckon with".

Many banks, he said, were interested in forming an alliance with Allahabad Bank. However, the bank (as the others) was watching the progress of the IB-Corp Bank-OBC alliance.

However, Mr Mahajan said that if it was found worthwhile, Allahabad Bank would prefer to tie up with one of the banks in western India or Indian Overseas Bank in the south.