The Reserve Bank of India (RBI) on Monday proposed to tighten the norms for housing finance companies (HFCs) by raising the ratio of liquid assets to deposits.
The banking regulator also sought to slash the maturity period for public deposits to five years from 10.
The RBI in a draft circular said HFCs accepting public deposits are subject to more relaxed norms compared with NBFCs.
Since the regulatory concerns associated with deposits are the same across all categories of NBFCs, the apex bank now wants similar norms for HFCs and deposit-taking NBFCs.
It has proposed to raise the proportion of liquid assets that include government securities to their public deposits.
Deposit-taking HFCs are required to maintain 13 per cent of liquid assets against their public deposits at present. The RBI wants this to be raised to 15 per cent in a phased manner — 14 per cent by September 30 and 15 per cent by March 31, 2025.
Maturity period
The next change is about the maturity period of the public deposits: HFCs are now 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.
“It has been decided that henceforth, with effect from the date of this circular, the public deposits accepted or renewed by HFCs shall be repayable after 12 months or more but not later than 60 months. Existing deposits with maturities above sixty months shall be repaid as per their existing repayment profile,” the circular said.
According to the RBI circular, deposit-taking HFCs should have a minimum investment grade rating.
If their credit rating is below the minimum investment grade, such HFCs would not renew existing deposits or accept fresh deposits till they upgrade their rating.
Public deposits vis-à-vis the capital or net owned funds (NOF) of HFC is another area of attention.
The ceiling on the quantum of public deposits held by deposit-taking HFCs will be reduced to 1.5 times NOF from 3 times NOF with effect from the date of this circular.
HFCs holding deposits over the revised limit shall not accept fresh public deposits or renew existing deposits till such time they meet the norm. However, the existing excess deposits will be allowed to run off till maturity.
HFCs are allowed selectively to issue co-branded credit cards with scheduled commercial banks, with prior approval of the Reserve Bank, for an initial period of two years and a review thereafter, it said.
The RBI has invited comments on the circular till February 29.
