MUMBAI: The RBI Wednesday proposed a host of changes to the rules governing housing finance companies (HFCs). These include doubling the net funds held to Rs 20 crore and splitting all of these companies into systematically large companies and the rest. The industry regulator also said that at least 75% of half of HFCNet assets should be individual home loans and proposed that no prepayment penalties be imposed for variable rate loans.
According to the RBI, a net held fund is the total of equity, free reserves, share premium account balance, and capital reserves. The central bank also proposed that failure to comply with the new rules would result in HFCs being treated as non-bank financial corporations (NBFCs). The rule changes have been initiated since HFCs came under the direct control of the RBI in early August 2019, from the National Housing Bank (NHB). The regulator has given the industry until July 15 to send it comments.
Industry players said the proposals are forward-looking and will strengthen the housing finance sector. However, some industry players have said that some of these rules already exist in various forms in NHB regulations. “The NHB refinancing rules state that at least 51% of an HFC’s net assets must be home loans, although this is not the case in the main rules for HFCs. . Thus, the HFCs which have been refinanced by NHB meet this criterion ”, declared HDFC executive director VS Rangan.

The RBI move is part of its efforts to bring all types of lenders – banks, NBFCs and HFCs – under one regulatory umbrella. The draft guidelines also state that existing HFCs will have one year to increase their net funds held to Rs 15 crore and two years to reach the limit of Rs 20 crore.
“This step aims to strengthen the capital base, especially small HFCs,” and new companies entering the sector, according to the draft proposal.
The draft guidelines also defined the terms “housing finance” and “housing finance” as financing the purchase, construction, reconstruction, renovation or repair of residential housing units. . The RBI draft rules also stated that HFCs not accepting deposits with an asset size of Rs 500 crore and above, and all HFCs accepting deposits, regardless of the size of their asset, will be processed. as systemically important HFCs. According to Indiabulls Housing Finance VC & MD Gagan Banga, for a while development work related to HFCs was slow and these rules, when adopted, would make the industry robust. “These rules would also make it easier for HFCs to raise debt and equity,” Banga said.