Best ESG Solution Highly Commended: PNB Housing Finance Ltd

Published: Apr 2021


Photo of Kapish Jain, PNB Housing Finance Ltd.

Kapish Jain

Chief Financial Officer

PNB Housing Finance Limited (PNBHFL) is a registered housing finance company with National Housing Bank. It was incorporated under the Companies Act, 1956 and commenced its operations on November 11th 1988. PNB Housing is promoted by Punjab National Bank.

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Sustainable funding goes a long way to addressing affordable housing crisis in India

The challenge

In a study conducted by Japan International Cooperation Agency (JICA)1 which was officially released on its website, India’s housing shortages are a serious challenge. 275 million people (approximately 22% of the total population) are currently unable to acquire quality housing, and 90% of the housing shortages are for low-income households. India is faced with rapid urbanisation and it is estimated that the urbanisation rate will be about 40% by 2030.

Improving access to housing for low to medium income households in urban areas is therefore extremely important.

PNB Housing, with the strength of its efficient and rigorous underwriting processes, technology platform and widespread network of 103 branches, 27 outreaches and 23 underwriting hubs as of 30th June 2020, is a significant lender in the sector. The company has also been successful in containing its gross non-performing asset ratio through its robust underwriting and collection processes. The Government of India has adopted the goal of ‘housing for all’ to provide housing to the entire country and has implemented various support measures.

The solution

To support this growth and development, JICA approved and signed a term financing arrangement of US$75m for a tenor of five years, the proceeds of which will focus on lending for affordable housing for the ‘economic weaker sections’ and ‘low income group’ populations of India under the extant ECB guidelines. Citi supported the financing with a two-year committed local currency facility to help PNBHFL with its short- to medium-term liquidity needs. Citi acted as the sole JICA coordinator and lead arranger.

Best practice and innovation

JICA will further expand its low-income housing loans in India through this financing, thereby improving the lives of low-income households and promoting sustainable economic growth in the country. This will contribute to its sustainable development goals.

The transaction was executed in just three months to enable an attractive committed financing solution for PNBHFL to tackle the economic slowdown due to the COVID-19 pandemic. This is JICA’s first financing support towards a housing financing company in India.

Key benefits

This transaction enables PNBHFL to utilise an important alternative source of funding, especially at a time of ongoing liquidity constraints in the current environment. The finance arrangement is in line with JICA’s Development Cooperation Charter, to promote human security, poverty improvement, gender equality and quality growth among others and it complies with five important sustainability and development goals for JICA. The funding will be utilised under the ECB norms for onward lending to the affordable segment as defined by the Reserve Bank of India.

“PNB Housing Finance and Citi share a long and strong relationship. A recent transaction of US$100m co-financing structure with JICA truly demonstrates the value a partner bank provides and, at the same time, its professionalism in executing large complex transactions. Considering the tough market environment, along with growing concerns around the COVID-19 global pandemic, the bank’s employees have helped us execute this deal in a most efficient and timely manner. This will help PNBHFL to further strengthen its position as a responsible lender to sections of society in need of sustainable credit and we look forward to cementing our association with the bank and view them as our trusted partner,” says Kapish Jain, Chief Financial Officer.

  1. The Japan International Cooperation Agency (JICA) is a governmental agency that coordinates official development assistance for the government of Japan. It is chartered with assisting economic and social growth in developing countries, and the promotion of international cooperation.

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Akshay Kumar

Vice President, India Solution Sales – Financial Institutions, Treasury and Trade Solutions

The innovative funding transaction enables PNB Housing Finance Limited to utilise an important alternative overseas source of funding towards providing home loans to the economically weaker section and low income groups; at a time of liquidity constraints stemming from the COVID-19 pandemic. The financing is in line with Japan International Cooperation Agency (JICA)’s Development Cooperation Charter, to promote human security, poverty reduction, gender equality and quality growth and stems well with the ESG Focus of Citi. The Citi and JICA teams worked together to provide tenor financing at a cost more competitive than that available in the Indian market – an important consideration for PNB Housing Finance Limited.

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