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Housing finance,post sub-prime Presentation at NHB – APUHF –APMCHUD Conference 12 April 2013, New Delhi Mythili Bhusnurmath, Consulting Editor, Economic.

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Presentation on theme: "Housing finance,post sub-prime Presentation at NHB – APUHF –APMCHUD Conference 12 April 2013, New Delhi Mythili Bhusnurmath, Consulting Editor, Economic."— Presentation transcript:

1 Housing finance,post sub-prime Presentation at NHB – APUHF –APMCHUD Conference 12 April 2013, New Delhi Mythili Bhusnurmath, Consulting Editor, Economic Times

2 Responsible borrowing &lending Three tenets: Responsible borrowing & lending are two sides of the same coin Neither is possible unless you have a stable macro-economic environment Third, while the first tenet seems to have been learnt somewhat, on the second, we still have a long way to go: eg repeated bouts of quantitative easing

3 Valuable learnings: for policy makers & financial sector players Black swans are not a figment of the imagination; tail events do happen and then can cause untold havoc. Financial crises are inevitable in free market economies Human beings cannot be reduced to equations; days of rocket science are over Economics is a social science NOT a physical science : There is no pat thumb rule for bubbles

4 Lessons for policy makers Markets are poor judges of impending crises; they often ignore warning signals Macro-economic stability is a public good & onus rests on policy makers Policy makers are part of the problem Regulators should get rid of their inferiority complex vis-à-vis players; re- naming a product doesnt make it new

5 More Lessons for policy makers Build in checks & balances before not after Recognise need for players to have skin in the game Ensure healthy loan-to-value ratios; risk weights take into account macro economic fundamentals such as asset-price inflation & exposure limits are dynamic Inclusive housing cannot be at the cost of responsible lending

6 Learnings for players Banks are about trust; it takes years to build reputations ; only an instant to destroy them Old world skills of knowing borrower must be re-learnt, documents can never be a substitute Sounds almost Biblical but there is always a come uppance for the unethical.

7 Recent Developments: India Renewed emphasis on macro-prudential aspects & lately consumer protection Basle III? Mortgage backed securities with adequate safeguards Strict guidelines for Mortgage Guarantee Cos.; 1 st IMGC Fresh impetus to CIBIL

8 Final Note Better safe than sorry, especially in poor, emerging markets : so when in doubt err on the side of caution cos The future aint what it used to be Yogi Berra Thank You


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