LIC Housing Finance reports robust 4QFY13 numbers

Net Interest Margin expansion for LIC Housing Finance was driven by improvement in both—cost of funds and yield on assets, says Nomura Equity Research

LIC Housing Finance (LICHF) reported robust 4QFY13 numbers, driven by expansion in NIM (net interest margin) and lower than expected provisions. Net profit of Rs320 crore was largely driven by 10.4% beat in NII (net interest income) as NIM expanded 36 bps (basis points) sequentially to 2.45%. Asset quality improved during the quarter with GNPLs (gross non-performing loans) declining 12.5% sequentially to Rs470 crore.  Loans were up 23.4% year-on-year with disbursals growth of 28.62% year-on-year. These observations were made by Nomura Equity Research in its Quick Note on LICHF.

NIM expansion was driven by improvement in both—cost of funds and yield on assets. Yield improved by 3bps quarter-on-quarter to 10.78%, while cost of funds declined by 27bps to 9.4% quarter-on-quarter. Consequently, spreads improved from 1.07% in 3Q13 to 1.38% in 4QFY13, point out Nomura Equity Research analysts.


Loan growth of 23.4% year-on-year was higher than Nomura’s expectation of 21.4% year-on-year; with disbursal growth of 16.7% year-on-year (disbursal growth in the retail segment was at 18.8% year-on-year). Sanctions grew 30.2% year-on-year. Loan growth was largely driven by continued traction in retail loans that grew 25.5% year-on-year (sequential increase of 7.5%); however, the higher yielding developer/ project loans declined 5.5% quarter-on-quarter (decline of 16.3% year-on-year). The developer/ project loans as a proportion of total loans declined further to 3.4% from 3.9% in the previous quarter.


Operating expenses and employee costs were marginally higher than Nomura’s expectations, with a cost-income ratio of 18.6% (down 113bps year-on-year). The brokerage further computes the total CAR (capital adequacy ratio) as standing at 15.8%, with a tier-1 ratio of 10.7%.


The key ratios of LICHF are given below:

According to Nomura, the key issues to watch in LICHF management’s discussion on Monday (29 April 2013) include the following: further colour on delinquencies, plans for the project loan book, FY14 loan growth guidance, plans for fresh capital issuance and trajectory for margins.


LICHF currently trades at 1.6x of Nomura’s FY14F ABV of Rs157 and 7.8x of Nomura’s FY14F EPS of Rs31.8. Nomura’s target price of Rs295 implies multiples of 1.9x of Nomura’s FY14F ABV and 9.3x of Nomura’s FY13F EPS.


Are gold fixed deposit schemes legal?

There is no obligation to disclose anything for a gold deposit scheme even though it is the average person, who will be drawn to it and not necessarily out of greed. Are regulators like RBI and SEBI sleeping? Is this scheme legal? Does this not amount to borrowing? Does this not become a “collective investment scheme”?

It is very common for many Indians to regularly give money to the jeweller in instalments and then buy ornaments.  Companies like Tanishq run it like a fixed deposit scheme. None of these let you get your cash back; you have to buy jewellery from them, at their prices. Most families get into these schemes because the woman in the house feels that it is the only way to accumulate gold for the daughter’s wedding. This insecurity or need, is taken advantage of by the gold shops. Every jeweller seems to have his own unique scheme to trap the buyer.

Recently, I saw an advertisement by KFJ (Kerala Fasion Jewellers), a jeweller in Chennai, who promises to give you gold of .916 purity ( approximately 22 carats fine) at committed prices today and for delivery after one, two, three, four or five years. The mathematics behind it is very simple. Let me put it down in a table: 

Pay now

Wait for


5 years


4 years


3 years


2 years


1 year


Get one gram of gold at end of the period by paying the amount now. It is gold of .916 purity.


The advertisement and the forms are vaguely worded. You do not know what you are going to get at the end of the period. In one place there is talk of one and a half gram of gold for the price of one gram. However, in the form there is no mention of anything.

The price of Rs2,499 for 22 carats is almost equal to a price of Rs30,000 for 10 grams of pure gold (.999). This is almost 10% percent higher than the present price of gold. So you are getting no bargain. On the other hand, your payment for each year of wait, increases by 5%-10% and is not uniform.

The funny thing about the scheme is that it says ‘In association with SBI Life Insurance”. I wonder what SBI Life is doing in this? No details mentioned in the advertisement or the website. I have the following concerns:

  1. Neither the advertisement nor the so-called application form mentions the name of the entity in legal terms. I do not know whether I am dealing with a proprietory, partnership or some other fictitious or real entity. Who do I do and file a claim against? No names, no addresses. A perfect set-up for a scam;
  2. What is SBI Life doing with it?  Carrying the name on the form gives an impression that SBI Life is guaranteeing this or is part of this;
  3. What about the taxation on any returns that I may get? This is a quasi money lending or a disguised fixed deposit scheme;
  4. Who guarantees this? Does this company have a balance sheet to back it?
  5. Is this a legal scheme, approved by SEBI or RBI?
  6. Does the RBI permit this company or entity to accept any amount in cash?
  7. There is no mention of a name to which a cheque can be issued. Gives me a creepy feeling that they may accept only cash;
  8. Is the name being hidden so that when a default happens, no one will know whom to pursue?
  9. What will this jeweller do with the money that he raises from this scheme?
  10. Is there a limit up to which he will accept or can accept?
  11. Who regulates this entity? SEBI? RBI? Ministry of company affairs? State government? No one?
  12. Who owns this company or firm? Indians or foreigners?
  13. Is it likely that RBI / SBI Life / SEBI will not see this advertisement unless someone “brings it to their attention?”
  14. In the form, there are enough wordings to let the jeweller get away with anything.

When a company wants to raise funds, it has to disclose quite a few things. Same for finance companies, regulated by the RBI. There is no obligation to disclose anything for a gold deposit scheme even though it is the average person who will be drawn to it and not necessarily out of greed. In the era of scams, this is another one waiting to happen.

So brazen is this, that it has a full page advertisement in the Chennai edition of major newspapers. I am sure that this is not their first advertisement nor is this the first time they are propagating this scheme. Are our regulators sleeping? Is this scheme legal? Does this not amount to borrowing? Does this not become a “collective investment scheme”?




4 years ago

Installment Gold purchase program will be trustworthy only when it is done by Government registered firms with clear terms and conditions. If any thing goes wrong, there should be a responsible entity to recover the loss from if any and to be returned to the investor. The fraudulent entity should be punished severely by the authority. There are hundreds of firms do such business correctly and trustfully. If proper insurance policy is obtained in the name of the investor as a precaution, it will be good.


4 years ago

I have came accross another similar gold scheme with "Khazana & Malabar" also. They, convert monthly deposit into 22 ct. gold and deliver the accumulated 22ct gold at the end of period with reduced 8 to 23% depreciation on making of ornaments. Perhaps, there might not be making charges.

They tempt us that the scheme is shielded against the growing gold prices, as they lock the price on day of deposit into physical gold. Well! it is correct, if the gold price rises. But, not in current situation, when the gold prices are falling. But, they are looting the savings in the form of high depreciation, say 23%.

They did not allow me to take zerox copy of the agreement,if I intend to join. But, they allowed either Cheque or Debit card for payment of monthly deposits.


4 years ago

most of the jewellers in kerala state are running the scheme with a little or no difference.authorities will remain asleep till another scam/chit gate breaks out.can anybody shook the authorities out of sleep?


4 years ago


anantha ramdas

4 years ago

Thanks, Mr Balakrishnan for bringing this issue to public notice!

Every non-working housewife gets a monthly 'pay-packet' to run the household expenses. The poor lady toils and saves, and lands herself into a glorious mess in buying gold (in any form) for the welfare of the family, particularly if she has a girl child at home.

In this particular case, even if they have a balance sheet showing all sorts of promising figures, there is no guarantee that something amiss will not happen.

In a likewise manner, there are banks and lending organizations that invite you to deposit "gold and jewellery" and take loans against them, on payment of interest. Such schemes are perfect set ups for disaster should the price fall.The banks will sell gold coins, bars etc, but will not re-purchase back from you!

This is identical to the housing disaster we had in the US a few years back. When property prices were going up, financiers/loan companies chased everyone to take "cheap"
loans; replace their old cars; take much needed long holidays and spend money as though there was no tomorrow.

When the housing crash took place, yes, there was no tomorrow for those who had heavily borrowed and a a great
many houses were "foreclosed",
leaving the debtor on the road.

I do not know who is responsible for permitting such sales. It is Cavet emptor - buyer beware - and it is us who have to be careful, and like you mentioned, some government department or statutory body that must look into this issue that you have so kindly raised.


R Balakrishnan

In Reply to anantha ramdas 4 years ago

Alas, our regulators are like the Keystone Cops. They will come for the post mortem ceremonies.

Dayananda Kamath k

In Reply to R Balakrishnan 4 years ago

it is the trend in india,as long is amount involved is small none of the regulator is bothered and even if a complaint is made they will interpret as it suits to them to avoid action.when it reaches 1000's of crores every regulator finds something to show that they are taking action.yesterdays advice by chidambarm our graet finance minister, making budgets for foreigners benefit,to enforcement directorate about action to be taken is point in this regard.


4 years ago

Can you please explain how did you arrive at the 30,000 figure? I thought it would be some 27000.


R Balakrishnan

In Reply to pravsemilo 4 years ago

2499 is for .916 purity. So 2499 divided by 916 multiplied by 999 should be nearly 2725 or so. Plus they give you after one year. Factor in around ten percent interest and you are at nearly 3000 per gram. They are not giving the gold today at 2499. If they do, then u are right.

Anil Agashe

4 years ago

Bless all those who will fall for this scheme. May their gold grow! But when they are cheated let them not say we were not warned or that the government should help them recover their money!

Personal Finance Exclusive
IRDA stops advance premium payments beyond 30 days. You may face issues!

On 12th April, LIC issued circular to all its offices stating that the advance payment of premiums facility is withdrawn. While IRDA may have good intentions for it, there will be many customers who will get adversely impacted. Did IRDA consider genuine difficulties that will arise?

The Insurance Regulatory and Development Authority (IRDA) has banned life insurance companies from accepting premium under linked as well as non-linked products for more than 30 days in advance to prevent money laundering. Life Insurance Corporation of India (LIC), in a circular dated 12 April 2013, states that the premium due may be accepted 30 days before the due date of payment of premium. In case you have opted for monthly premium payment mode, you will now be allowed to pay only three months’ premium in advance on the date of commencement of the policy.


According to Mr. Prashant Tripathy, chief financial officer, Max Life Insurance, “At Max Life Insurance we have some specific steps in place to ensure that we do not hold on to customer money, paid in advance. As per our current process, we refund advance premium if it is paid three months in advance (for all modes). We are conceptually aligned to the recommendation of not accepting advance premium. The time-frame of one month for yearly premium modes and three premiums in advance for policies with monthly mode premium payment options is also apt.” But, it means not all companies have implemented the 30-day rule yet, even if they agree to it. If the 30 day rule was really good then all insurance companies would have jumped for it.


Until now, a policyholder could make a lump-sum payment of premium before the due date and even get a nominal discount on it. IRDA may have reasons like preventing mis-selling to come up with this rule as agents may be enticing policyholders to avail the premium discount by paying premiums in advance. In fact, LIC, for its traditional policies, allows premium payments five years in advance. IRDA may want to promote a regular savings habit.


While IRDA’s intentions may be genuine, the move will adversely impact several groups of policyholders. It is unclear if IRDA has given a thought to the problems that can arise. The change may even be termed as anti-consumer by many policyholders and agents based on the grievances that can arise. IRDA should have allowed three to six months of advance premium payment without any discount. Here’s why.


Some of the issues that will soon come up:


  • Companies ask salaried employees to submit proof of 80C investment by 31st January every year. If the life insurance policy premium for the employee is due in March, how will the employee submit the proof as the insurance company will not accept premium payment in January due to the 30-day restriction? Most of the insurance policies are usually sold in the month of March due to the looming deadline of financial year end. If so, there will be lakhs of salaried employees who will not be able to comply with company rules. Will the corporates change their rules to accommodate employees unable to show 80C proof by January end?


Mr Tripathy, says, “This we understand is a concern but customers while filing I-T returns can ask for a refund for any excess tax paid.” Asking for refund for any excess tax paid is tedious process that will arise if companies stick to 31st January deadline for 80C proof and the employee cannot give it as renewal is due in March.


  • On 6 December 2004, LIC had come up with a circular which states, “We have been receiving requests especially from the deference personnel to allow acceptance of premium under their policies by November, so as to enable them to obtain the tax rebate at source. If the premium is paid after November, tax rebate at source is not available and refund has to be obtained from the Income-Tax Department.


In order to facilitate availability of tax rebate at source, it has been decided to allow acceptance of premium up to six months in advance and the premium receipt is issued across the counter. However, no discount would be allowed on such advance premium payment and the advance payment option shall be allowed only within the same financial year.”


It is clear that the defence personnel will face issues now that premiums will be accepted only 30 days in advance of the due date. Allowing premium payment up to six months in advance with no discount was put by LIC for a specific purpose.

  • Many policyholders have fluctuating income. They may have money on hand that can pay future premiums, but if they are not allowed to pay the premium the money may end up being spent on non-financial things or go in other financial investments. When the actual premium due date comes, they may not have readily available funds to make the premium payment.
  • The new ULIP does not have a ‘cover continuance’ feature. There is no concept of revival of new ULIP. If you are not able to make premium payment, the policy will go in a discontinued mode and the funds will earn a pathetic savings interest rate. If five policy years are completed, then the corpus is returned back to you. A person with a fluctuating income will be refused to make advance premium payment when money is available and will fall in the trap if the money is not ready at the time of premium renewal. The policy may get discontinued at a wrong time when the fund value is low due to market conditions.


  • Policyholders leave India for a few years and may not want the hassle of remembering to pay premium within 30 days of the due date. It is much easier to make premium payments in advance and forget about the issues that can arise if you are unable to make the payment on the due date. The convenience of premium payment is completely lost with the new rule. Sure, online payments can be done from anywhere in the world, but many policyholders would rather pay by cheque. They want to ensure that payment is properly applied to the policy and no obligation outstanding.


Many policies have small amount of annual premium (less than Rs1,000). It is just easy to make future premium payments and forget about it rather than to remember such small commitments. Can IRDA help these customers?




4 years ago


Emerging Voice

4 years ago

This is good initiative. Many of us who use internet banking will benefit as we schedule payments for different dates. Why pay in advacnce when one has grace period upto 30 days for different payment ter ms.


4 years ago



4 years ago

Another hare-brained idea from IRDA.
Why cant the policyholder pay his premium in advance when he has the funds available with him?
Why should he wait till the premium due date?(or 30 days before)
It's all about convenience.
How does limiting a premium payment to 30 days prevent money laundering?

Kirit Nagda

4 years ago

IRDA Should allow at least for One Year advance Premium. All are not Punctual including agents and Clients.

Kirit Nagda
Insurance Agent


Dipen Shah

In Reply to Kirit Nagda 4 years ago

You can advise your clients to park the advance premium in debt mutual funds and transfer the due premiums on regular due dates. By doing so, they would have the dual advantage of continuing policy cover and earning higher interest. In advance premium, if one would have the requirement of the money, he/she cannot withdraw the advance premium. Here they would have the benefit of flexible funds too.

Dipen Shah

4 years ago

LIC has now come up with an arrangement with LIC Nomura MF to direct transfer of premiums from LICMF Savings Plus Fund, which is a debt fund and provides 6-7 % p.a. returns to the investors. The policyholder has to provide details of his/her policies in prescribed format and LICMF will transfer the said premiums on the due date to LIC. This facility is similar to ECS, where in the policy holder has to maintain balance in his bank a/c.

However, the issue of showing payment proof in month of November for policy due in March would remain there. The employers should consider the fact that payments may be made in March on time and should give the benefit to the employee.


4 years ago

1. The idea of IRDA thru this clause is primarily to curb money laundering and ALSO miss-selling. The regular pay policies are communicated to client as single pay and premium of next 3-5 years is collected in one shot. This gives a false impression to client of the product being single premium low cost.
2. For tax benefit, most of the companies consider payments made till Nov-jan and on the basis of last year premium receipt accept that the person shall make further payment in his policy and thus extend tax benefits. It happens every year with thousands of my customers.
3. people going outside india may very well choose auto debit mode through which they dont need to remember the premium dates. If they leave the amount in their account, premium shall get debited when due.
4. It is a rule of insurance that one should take liability of only those premiums which can be fulfilled by your regular income. In case of fluctuating income, it is always suggested to go for single premium products. This is precisely one of the reasons due to which IRDA wants to restrict advance payments so that customers buy suitable products as per their earning schedule and not as per the agent's wishes.


Deepak Shenoy

In Reply to pawan 4 years ago

Great points Pawan and I agree with all the above. Curbing of mis-selling is very very important - more than the minor difficulties that people will face.

In addition, if people want to go abroad but still pay by cheque, they can provide post-dated cheques that meet the 30 day criteria? This applies for those 1000 rupee cheques as well.

I have worked in organizations where they honour 80C insurance payments if you show last year's receipt (for payments to be done in Feb-Mar)

The problem really is the mis-selling, but it doesn't seem like these mis-sellers are being arrested and being charged for fraud, or that LIC (or IRDA) is actively banning them from any further insurance activity for at least 10 years. That is really the best deterrent - tweaking laws is one thing, but can we punish offenders too?

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