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RBI proposes to increase minimum Net Owned Fund size of HFCs

The proposal comes as part of a draft regulatory framework which will be applicable to HFCs.

“The Bank proposes to increase the minimum NOF for HFCs from the current requirement of Rs 10 crore to Rs 20 crore,” the draft regulatory framework said.

“For existing HFCs the glide path would be to reach Rs 15 crore within 1 year and Rs 20 crore within 2 years. This step is aimed at strengthening the capital base, especially of smaller HFCs and companies proposing to seek registration under NHB Act.”

The draft guidelines also proposed to have an inclusive definition of the terms ‘providing finance for housing’ or ‘housing finance’ as per provisions of the RBI’s master circular on housing finance addressed to banks and NHB’s illustrative list of housing loans.

Accordingly, ‘Housing Finance” or “providing finance for housing” means: financing, for purchase or construction or reconstruction or renovation or repairs of residential dwelling units.

On the loaning part, the guidelines said: “All other loans including those given for furnishing dwelling units, loans given against mortgage of property for any purpose other than buying or construction of a new dwelling unit or units or renovation of the existing dwelling unit or units will be treated as non-housing loans.”

Besides, the RBI proposed to issue HFC regulations by classifying them as systemically important and non-systemically important, so as to introduce a graded approach as applicable to NBFCs in general.

“In other words, non-deposit taking HFCs (HFC-ND) with asset size of Rs 500 crore and above; and all deposit taking HFCs (HFC-D), irrespective of asset size, will be treated as systemically important HFCs,” the regulation said.

“HFCs with asset size below Rs 500 crore will be treated as non-systemically important HFCs (HFC-non-SI). While the regulations for HFC-NDSI and HFC-Ds will be as existing under NHB regulations or harmonised with NBFC regulations, the regulations for HFC-non-SI will be brought on par with relevant regulations for NBFC-ND-non-SI.”

In addition, the RBI said that as a measure of customer protection and also in order to bring uniformity with regard to repayment of various loans by borrowers of banks and NBFCs, no foreclosure charges or pre-payment penalties shall be levied on any floating rate term loan sanctioned for purposes other than business to individual borrowers with or without co-obligants.

“Since similar regulations are currently not prescribed for HFCs, it is proposed to extend these instructions to HFCs,” the regulation said.

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