State Bank of India will wind up its housing finance arm and is scouting for a strategic partner for its mutual fund subsidiary.

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"When you have many businesses, you can fail. SBI Home Finance didn't work well. We are winding it up," SBI chairman A K Purwar said on Wednesday, adding the subsidiary would not be merged with the parent bank.

The bank decided to close the home finance arm as it was saddled with huge non-performing assets and incurred heavy loss.

However, SBI has aggressively tapped the home loan segment and is currently a major player with a portfolio of about Rs 1,500 crore (Rs 15 billion), he said.

SBI, ICICI Bank and other PSU and private banks with access to cheaper funds have acquired over 65 per cent of the home loan market, leaving little space for housing finance companies.

The home loan segment grew by a whopping 76 per cent to Rs 51,673 crore (Rs 516.73 billion) last fiscal, with banks extending loans worth Rs 33,841 crore (Rs 338.41 billion) as against Rs 14,745 crore (Rs 147.45 billion) in 2001-02.

On the mutual fund arm, Purwar said, "We are looking for a partner. We will soon appoint a consultant for shortlisting the joint venture partner."

Asked whether the bank would exit from the UTI Mutual Fund, the SBI chairman said, "It is upto the government to decide."

SBI along with Life Insurance Corporation, Bank of Baroda and Punjab National Bank hold 25 per cent stake each in the restructured net-asset value based UTI-II that was rechristened UTI Mutual Fund.

The ministry of finance was toying with the idea of changing the ownership pattern in UTI Mutual Fund as the four promoters already had mutual fund arms of their own.

The move was line with the recommendation of Joint Parliamentary Committee that probed the UTI scam.

JPC had said there could be "conflict of interest" if banks and FIs having mutual funds of their own, continued to control UTI mutual fund.