RBI Mandates Deposit-Taking Housing Finance Companies to Maintain Liquid Assets to Extent of 15% of Public Deposits
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- Last Updated on 14 August, 2024
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Circular No. RBI/2024-25/61 DOR.FIN.REC.No.34/03.10.136/2024-25, Dated: 12.08.2024
Earlier, the RBI advised that further harmonisation of regulations applicable to Housing Finance Companies (HFCs) & Non-Banking Finance Companies (NBFCs) would be undertaken in a phased manner. Accordingly, based on a review of the extant regulations applicable to HFCs, the RBI has now decided to issue the revised regulations.
The RBI has directed all deposit-taking HFCs to maintain liquid assets equivalent to 15% of their public deposits on an ongoing basis, up from the current requirement of 13%. By January 1, 2025, these HFCs must maintain 14% liquid assets, including unencumbered approved securities, and by July 1, 2025, they must hold 15% of total liquid assets as a percentage of public deposits.
Further, the RBI has directed that HFCs ensure that full asset cover is available for public deposits accepted by them at all times and inform the National Housing Bank (NHB) if the asset cover falls short of the liability on account of public deposits.
The public deposits accepted or renewed by HFCs must be repayable after a period of 12 months or more but not later than 60 months. However, existing deposits with maturities above 60 months can be repaid as per their repayment profile. Currently, HFCs are allowed to accept or renew public deposits repayable after a period of 12 months or more but not later than 120 months from the date of acceptance or renewal of such deposits.
Additionally, the RBI has directed that deposit-taking HFCs set a board-approved internal limit separately within the limit of direct investment for investments in unquoted shares of another company, which is not a subsidiary company or a company in the same group of the HFC. It also directed NBFCs to put in place a mechanism to provide nomination facilities for depositors, regardless of whether customers demand the service.
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