Housing Finance Company (Reserve Bank) Directions, 2021
Master Direction – Non-Banking Financial Company – Housing Finance
Company (Reserve Bank) Directions, 2021- RBI Notification
The Reserve Bank of India (the Bank), having considered it necessary in the public interest, and being satisfied that, for the purpose of enabling the Bank to regulate the financial system to the advantage of the country and to prevent the affairs of any Housing Finance Company (HFCs) from being conducted in a manner detrimental to the interest of investors and depositors or in any manner prejudicial to the interest of such HFCs, and in exercise of the powers conferred under sections 45L and 45MA of the Reserve Bank of India Act, 1934 and Sections 30, 30A, 32 and 33 of the National Housing Bank Act, 1987, hereby issues to every HFC, in supersession of the regulations/ directions as given in Chapter XVII of these directions, the Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021 hereinafter specified.
Preliminary
- Short Title and Commencement and applicability of the Directions
1.1. These directions shall be called the Non-Banking Financial Company –Housing Finance Company (Reserve Bank) Directions, 2021.
1.2. These directions shall come into force with immediate effect. - Applicability
2.1. Unless otherwise directed by the Bank, these directions except directions contained in Chapter XII shall be applicable to every Housing Finance Company (HFC) registered under Section 29 A of the NHB Act, 1987.
2.2. The directions contained in Chapter XII shall be applicable to every auditor of an HFC. - Applicability of directions
3.1. The following directions, as further detailed in the Annex I shall apply mutatis mutandis to all HFCs:
3.1.1. Guidelines on Liquidity Risk Management Framework: All non-deposit taking HFCs with asset size of ₹100 crore and above and all deposit taking HFCs (irrespective of asset size) shall pursue liquidity risk management, which inter alia should cover adherence to gap limits, making use of liquidity risk monitoring tools and adoption of stock approach to liquidity risk. It will be the responsibility of the Board of each HFC to ensure that the guidelines are adhered to. The internal controls required to be put in place by HFCs as per these guidelines shall be subject to supervisory review.
3.1.2. Guidelines on Maintenance of Liquidity Coverage Ratio (LCR): HFCs shall maintain a liquidity buffer in terms of LCR, which will promote resilience of HFCs to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days. Guidelines on LCR will be applicable to HFCs as per the following timeline:
3.1.3. Loans against security of shares: HFCs lending against the collateral of listed shares shall maintain a Loan to Value (LTV) ratio of 50% for loans granted against the collateral of shares. Any shortfall in the maintenance of the 50% LTV occurring on account of movement in the share price shall be made good within seven working days.
3.1.4. Loans against security of single product – gold jewellery: HFCs shall maintain a Loan-to-Value (LTV) Ratio not exceeding 75 per cent for loans granted against the collateral of gold jewellery, and shall put in place a Board approved policy for lending against gold.
3.1.5. Guidelines on Securitization Transactions and reset of Credit
Enhancement: HFCs shall carry out securitization of standard assets and
transfer of assets through direct assignment of cash flows and the underlying securities. In doing so, HFCs, among other things, shall conform to the minimum holding period (MHP) and minimum retention requirement (MRR) standards.
3.1.6. Managing Risks and Code of Conduct in Outsourcing of Financial Services: It is imperative for HFCs outsourcing their activities that they ensure sound and responsive risk management practices for effective oversight, due diligence and management of risks arising from such outsourced activities.
3.1.7. Implementation of Indian Accounting Standards: HFCs shall maintain a prudential floor in respect of impairment allowances and follow instructions on regulatory capital.
3.1.8. Master Direction – Know Your Customer (KYC) Direction, 2016, as amended from time to time.
3.1.9. Master Direction – Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016, as amended from time to time. The guidelines contained in this master direction is applicable to all HFCs irrespective of asset size.
3.1.10. Master Direction – Information Technology Framework for the NBFC Sector dated June 08, 2017, as amended from time to time.
3.2. Any other directions/ guidelines issued by any other Department of the Bank, as applicable to an HFC shall be adhered to.
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