Mumbai: The Reserve Bank of India (RBI) on Monday said housing finance companies (HFCs) will need to have higher liquid assets to back deposits, and allowed these lenders to issue co-branded credit cards, in a move to put them at par with their non-bank financier counterparts.
These mandates were first proposed in draft guidelines released on 15 January. The Finance Act, 2019 amended the National Housing Bank Act, 1987 and conferred certain powers on RBI for regulation of housing finance companies. This led to the transfer of regulations of mortgage lenders to RBI. Since then, the RBI has issued a clutch of regulations that treat housing finance companies as a category of non-banking financial company (NBFC), gradually aligning the regulatory framework for both.
Some sections of the final guidelines are applicable to deposit-taking housing finance companies, while the rest are for all mortgage lenders. For instance, housing finance companies that raise public deposits need to maintain 13% liquid assets against such deposits. This has now been raised to 15% in tranches. Such lenders will need to raise the percentage of liquid assets to 14% by 1 January 2025, and to 15% in another six months.
“Currently, HFCs accepting public deposits are subject to more relaxed prudential parameters on deposit acceptance as compared to NBFCs,” RBI said in a notification. “Since the regulatory concerns associated with deposit acceptance are same across all categories of NBFCs, it has been decided to move HFCs towards the regulatory regime on deposit acceptance as applicable to deposit-taking NBFCs and specify uniform prudential parameters…”
According to information available on the website of National Housing Bank, HFCs that can accept deposits include Can Fin Homes Ltd, Cent Bank Home Finance Ltd, Aadhar Housing Finance Ltd, ICICI Home Finance Company Ltd and LIC Housing Finance Limited.
That apart, RBI also allowed HFCs to hedge the risks arising out of their operations and to issue co-branded credit cards. “HFCs are allowed to issue co-branded credit cards, subject to the instructions prescribed.” it said.
According to RBI, to accept public deposits, deposit-taking housing finance companies will have to obtain a minimum investment-grade credit rating at least once a year. “In case their credit rating is below the minimum investment grade, such HFCs shall not renew existing deposits or accept fresh deposits thereafter till they obtain an investment grade credit rating.”
Meanwhile, the central bank lowered the maximum deposit tenure at housing finance companies to five years. Existing deposits with maturities above sixty months shall be repaid as per their existing repayment profile, it said. Also, RBI lowered the ceiling on the quantum of public deposits from three times to 1.5 times of net owned funds.
“Deposit-taking HFCs holding deposits in excess of the revised limit shall not accept fresh public deposits or renew existing deposits till they conform to the revised limit. However, the existing excess deposits will be allowed to run off till maturity," it said.Also
