RBI has changed rules for Housing Finance Companies (HFCs), Check Maximum Loan period and other new rules

The Reserve Bank of India (RBI) is considering stricter regulations for deposit-taking housing finance companies (HFCs), aiming to bring them in line with rules applicable to deposit-taking non-banking finance companies (NBFCs). This move involves reducing the ceiling on public deposits and shortening the maximum deposit period.
Proposed Changes in Deposit Limits
As per the draft circular, the ceiling on the amount of public deposits HFCs can hold will be reduced from three times to 1.5 times of their net owned funds. HFCs exceeding this revised limit cannot accept new public deposits or renew existing ones until they meet the specified criteria. Existing excess deposits will be allowed to run off until maturity.
Revised Maximum Deposit Period
The longest period for which HFCs can accept deposits will be reduced from the current 120 months to 60 months. Existing deposits with maturities above 60 months can be repaid as per their original repayment schedule. The minimum deposit period for HFCs remains at 12 months.
Asset Cover and Credit Rating Requirements
HFCs accepting public deposits must ensure a full asset cover at all times and obtain a minimum investment grade credit rating annually. If their credit rating falls below the minimum investment grade, these HFCs cannot renew existing deposits or accept fresh ones until they regain an investment grade credit rating.
Maintenance of Liquid Assets
All deposit-taking HFCs are required to maintain liquid assets equivalent to 15% of their public deposits, phased in at 14% by September 30, 2024, and 15% by March-end, 2025. This aligns with the regulations for NBFCs.
Safe Custody of Liquid Assets and Harmonization with NBFCs
RBI intends to align regulations on safe custody of liquid assets for HFCs with those applicable to NBFCs, ensuring harmonization. The rules for NBFCs regarding safe custody of liquid assets and collection of interest on SLR securities will also apply to deposit-taking HFCs.
Opening of Branches and Appointment of Agents
In matters of opening branches and appointing agents to collect deposits, HFCs will follow the norms applicable to NBFCs.
Internal Limits for Investments
Deposit-taking HFCs will need to establish board-approved internal limits for investments in unquoted shares of companies not affiliated with them. These internal limits will be part of overall exposure limits to the capital market for deposit-taking HFCs.