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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