RBI Says: RBI will tighten its grip on housing finance companies, there will be a ban on taking deposits for more than 5 years

RBI On HFC: Banking sector regulator Reserve Bank of India (RBI) is preparing to crack down on housing finance companies taking deposits from the common people. Housing finance companies like PNB Housing Finance and LIC Housing Finance that take deposits will be regulated like NBFCs.  

RBI has issued a draft circular regarding the review of regulatory framework for housing finance companies and the regulation which is currently applicable for NBFCs will also be applicable to housing finance companies. RBI has asked NBFCs as well as housing finance companies and stakeholders to give their suggestions by 29 February 2024. 

RBI said, there are regulatory concerns regarding accepting deposits and it applies to all categories of NBFCs. In such a situation, it has been decided that the same regulatory rules will be applicable to housing finance companies as are applicable to deposit accepting NBFCs. 

RBI has said in its draft regulatory framework that housing finance companies without investment grade credit rating will not be allowed to take public deposits or renew existing deposits. RBI has proposed to reduce the limit of public deposits for housing finance companies to one and a half times their total funds instead of three times. RBI said that even after the draft paper is implemented, these rules will come into effect from January 15, 2024 after the circular is issued. There are nine housing finance companies in the country which are allowed to take public deposits. 

Housing finance companies will not be able to raise deposits for a tenure of more than five years. At present, deposits are allowed for up to 10 years. At present, deposits whose maturity is above 60 months will be paid under the existing repayment period only. 

Also read 

WEF 2024: 56% chief economists said – global economy will remain weak in 2024 too, but are positive about South Asia led by India