RBI draft circular to strict down norms for HFCs

The Reserve Bank of India on Monday proposed to strictly tight the regulations for housing finance companies [HFCs] that mostly accept public deposits, aligning it to the norms of NBFCs.

RBI draft circular to strict down norms for HFCs

The draft circular proposed by India's central bank, consist, all deposit-taking HFCs should raise their total liquid assets, along with the unmortgaged approved securities, to 15 percent of public deposits, from 13 percent, by the end of March 2025.

As per RBI guidelines, since the regulatory concerns associated with deposit acceptance are the same across all categories of NBFCs, it has mandatory to move HFCs towards the regulatory regime on deposit acceptance as applicable to deposit-taking NBFCs and specify uniform prudential parameters.

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The regulatory body has also proposed the fixed ceiling on public deposits held by HFCs to be reduced to 1.5 times of net-owned funds from 3 times. Meanwhile, the minimum percentage will be increased to 14% of deposits by September 2024, and 15% by March 2025.

As per RBI Data, HFCs are currently allowed to accept or renew public deposits repayable after 12 months or more but not later than 120 months from the date of acceptance or renewal of such deposits. From now onwards, the public deposits accepted or renewed by HFCs shall be repayable after 12 months or more but not later than 60 months. While existing deposits with maturities above 60 months shall be repaid as per their existing repayment profile.

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As per the draft notice, deposit-taking HFCs must fix board-approved internal limits separately within the limits of direct investment and in addition to that, housing finance companies be allowed to barricade the risks arising out of their operations.

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