MUMBAI: RBI has tightened norms for deposit-taking housing finance companies and brought them on an par with non-banking finance companies. The new norms increase liquidity requirements, restrict deposit mobilisation based on credit rating and restrict branch opening. The revised rules also now allow HFCs to participate in derivatives pertaining to interest rate, currencies, and credit risks.
RBI had begun the process of harmonizing regulations of HFCs and NBFCs in 2020 and had said that it would progress in a phased manner to avoid disruption. The new regulations makes it much more difficult for HFCs who are not in good financial health to raise deposits.
Currently, deposit-taking HFCs are required to hold 13% of public deposits as liquid assets. This requirement will increase to 15% by July 2025. Additionally, HFCs must obtain an investment-grade credit rating annually. The ceiling on the quantum of public deposits will be reduced from three times to 1.5 times their net owned fund.