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DAILY NEWS ANALYSIS

  • 19 June, 2020

  • 3 Min Read

RBI Norms for NBFC’s

RBI Norms for NBFCs

A housing finance company is considered a non-banking financial company (NBFC) under the RBI’s regulations. A company is treated as an NBFC if its financial assets are more than 50% of its total assets and income from financial assets is more than 50% of the gross income.

  • RBI has proposed stringent norms for housing finance companies by mandating 75% of their home loans to individual borrowers by 2024.
  • Recently, RBI has proposed the definition of qualifying assets for housing finance companies (HFCs).
  • It defined ‘qualifying assets’ as loans to individuals or a group of individuals, including co-operative societies, for construction/purchase of new dwelling units, loans to individuals for renovation of existing dwelling units, lending to builders for construction of residential dwelling units.
  • Non-Housing loans - All other loans, including those given for furnishing dwelling units, loans given against mortgage of property for any purpose other than buying/construction of a new dwelling units or renovation of the existing dwelling units.
  • Under new definition, at least 50% of net assets should be in the nature of ‘qualifying assets’ for HFCs, of which at least 75% should be towards individual housing loans.(PT)
  • Such HFCs which do not fulfil the criteria will be treated as NBFC – Investment and Credit Companies (NBFC-ICCs).
  • They will be required to approach the RBI for conversion of their Certificate of Registration from HFC to NBFC-ICC.
  • The NBFC-ICCs which want to continue as HFCs would have to follow a roadmap to make 75% of their assets individual housing loans.
  • The central bank also proposed a minimum net-owned fund (NOF) of 20 crores as compared to 10 crores now.
  • Existing HFCs would have to reach 15 crores within a year and 20 crores within two years.

Source: TH


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