𝐑𝐁𝐈’𝐬 𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐅𝐫𝐚𝐦𝐞𝐰𝐨𝐫𝐤 𝐟𝐨𝐫 𝐇𝐅𝐂𝐬 𝐭𝐨 𝐀𝐥𝐢𝐠𝐧 𝐰𝐢𝐭𝐡 𝐍𝐁𝐅𝐂𝐬

On August 12, 2024, the Reserve Bank of India (RBI) announced a significant update to the regulatory framework for 𝐇𝐨𝐮𝐬𝐢𝐧𝐠 𝐅𝐢𝐧𝐚𝐧𝐜𝐞 𝐂𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 (𝐇𝐅𝐂𝐬), aimed at harmonizing their regulations with those governing 𝐍𝐨𝐧-𝐁𝐚𝐧𝐤𝐢𝐧𝐠 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐂𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 (𝐍𝐁𝐅𝐂𝐬). This move follows the transfer of regulatory authority over HFCs from the National Housing Bank (NHB) to the RBI on August 9, 2019, due to an amendment made to the NHB Act, 1987, pursuant the Union Budget announcements for 2019-20, leading to several regulatory changes to bring HFCs in line with NBFC standards.

As part of this ongoing alignment process, the RBI conducted a comprehensive review to harmonize regulations while still recognizing the distinct nature of HFCs. Key changes include:

𝐐𝐮𝐚𝐧𝐭𝐮𝐦 𝐨𝐟 𝐃𝐞𝐩𝐨𝐬𝐢𝐭𝐬: The limit on public deposits for deposit-taking HFCs, which adhere to all prudential norms and hold at least an investment-grade credit rating, has been reduced from 3 times to 1.5 times of net owned funds. HFCs currently exceeding this limit are barred from accepting new deposits or renewing existing ones until they meet the revised criteria. Existing excess deposits will be allowed to mature as scheduled.

𝐃𝐞𝐩𝐨𝐬𝐢𝐭 𝐓𝐞𝐫𝐦𝐬: Public deposits accepted or renewed by HFCs must now have a maturity period between 12 and 60 months. Deposits already in place with terms exceeding 60 months will remain subject to their original terms.

𝐌𝐚𝐢𝐧𝐭𝐞𝐧𝐚𝐧𝐜𝐞 𝐨𝐟 𝐋𝐢𝐪𝐮𝐢𝐝 𝐀𝐬𝐬𝐞𝐭𝐬: All deposit-taking HFCs are required to maintain liquid assets equivalent to 15% of their public deposits, up from the current 13%. This will be implemented in stages, with a requirement of 14% by January 1, 2025, and the full 15% by July 1, 2025. Additionally, to accept public deposits, HFCs must secure a minimum investment-grade credit rating at least annually. HFCs falling below this rating are prohibited from accepting new deposits or renewing existing ones until their rating is restored to the required level.

Following this review, the revised regulations will be implemented starting January 1, 2025. Detailed guidelines for both HFCs and NBFCs are available in Parts A and B of the Annex attached to the RBI’s notification.

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