Housing Finance Companies are entities registered under the Companies Act and which primarily engage in the business of providing finance for housing, whether directly or indirectly.
The HFCs were dedicatedly regulated by National Housing Bank. But increasing stress and other issues tempted the government to transfer the regulation of HFCs to the RBI by amending the statutes. At the same time, the NHB will keep some of the regulatory powers over the HFCs.
Regulatory norms for HFCs
|Minimum Net-owned-Fund||Rs. 20 crore|
|CRAR||15% by March 31, 2022|
|Acceptance of Deposit||12 months to 120 months for HFCs|
Housing Finance Companies as NBFCs
The government transferred the regulation of HFCs to RBI from August 9, 2019, onwards. Before that, Housing Finance Companies are regulated by the NHB. The RBI, in July 2020, issued a new set of guidelines for the regulation of HFCs as NBFCs and the guidelines include:
- defining principal business and qualifying assets for HFCs
- classifying HFCs as systemically important (asset size of ₹500 crore and above) and non-systemically important (asset size less than ₹500 crore)
- Reserve Bank’s directions on Liquidity Risk framework, CRAR, securitisation etc. for NBFCs, to be made applicable to HFCs
Qualifying assets of HFCs should be:
(i) at least 50% of net assets as qualifying assets i.e. towards housing finance
(ii) at least 75% of qualifying assets towards housing finance for individuals
The qualifying asset norm was realised by 2022 through a timeline. The Minimum net-owned fund for HFCs is Rs. 20 crore.