Page 39 - Banking Finance November 2021

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to HFCs which do not currently fulfill the qualifying assets (HFC) and companies proposing to seek registration
criteria, but wish to continue as HFCs in future. The under NHB Act. The existing HFCs would be provided
timeline shall be phased as under: with a glide path to achieve minimum Net Owned Fund
(NOF) of Rs 20 crore. They will be required to reach Rs
Timeline At least 50% of net At least 75% of
assets as qualifying qualifying assets 15 crore within one year and Rs 20 crore within two
assets i.e., towards towards housing years.
housing finance finance for
individuals 7. Harmonizing definitions of Capital (Tier I &
March 31, 2022 50% 60% Tier II) with that of NBFCs
The components of Tier I and Tier II capital are similar
March 31, 2023 - 70%
for NBFCs and HFCs except for the treatment of
March 31, 2024 - 75%
perpetual debt instruments (PDI). Presently PDIs are
Source: RBI draft guideline on HFC dated 17.06.2020 not considered as part of capital of HFCs unlike that of
NBFCs. It is proposed to align the definitions of capital
5. Classifying HFCs into 'Systemically (both Tier I and Tier II) of HFCs with that of NBFCs.
a) Inclusion of PDIs as a component of Tier I and Tier
Important' and 'Non - Systemically
II capital on the lines of NBFCs.
Important' entities for regulatory purposes
b) PDIs can be treated as part of Tier I / Tier II capital
Presently HFC regulations are common for all HFCs only by non-deposit taking systemically important
irrespective of their asset size and ownership. It is HFCs.
proposed to issue HFC regulations by classifying them
as; c) PDIs or any other debt capital instrument in the
a) Systemically Important nature of PDIs, already issued by either deposit
taking HFCs or non-systemically important HFCs will
b) Non-systemically Important be reckoned as Tier I or Tier II capital as the case
This is to introduce a graded approach as applicable to may be for a period not exceeding three years.
NBFCs in general. Since HFCs are treated as a category of NBFCs for
Y Systemically Important HFCs (HFC - SI)
regulatory purposes, investments in shares of other HFCs
Y Non - Deposit taking HFCs (HFC - NDSI) with asset and also in other NBFCs (whether forming part of group
size of Rs. 500 crore & above; or not), shall be reduced from the Tier I capital to the
Y All deposit taking HFCs (HFC - D), irrespective of extent it exceeds, in aggregate along with other
asset size, exposures to group companies, ten per cent of the
owned fund of HFC.
Y Non-systemically Important HFCs (HFC - non - SI)
Y HFCs with asset size below Rs. 500 crore
While the regulations for HFC-NDSI & HFC-Ds will be as
existing under NHB regulations or harmonized with
NBFC regulations, the regulations for HFC-non-SI (i.e.,
HFCs with asset size below Rs. 500 crore) will be brought
on par with relevant regulations for NBFC-ND-non-SI.

6. Minimum Net Owned Fund (NOF)
requirement of Rs. 20 crore
RBI also proposed to double the minimum net owned
fund (NOF) requirement for housing finance companies
to Rs 20 crore. The step is aimed at strengthening the
capital base mainly of small housing finance companies

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