The draft circular of the RBI has proposed to review certain directions for deposit-taking NBFCs as part of further harmonisation of HFC regulations with those of NBFCs.
Mumbai: The Reserve Bank of India has issued a draft circular on Monday and proposed to harmonize the regulations of housing finance companies (HFCs) with those of non-banking finance companies (NBFCs) in several areas, such as the minimum capital requirement and deposit-taking rules. The RBI has also said that it has carried out a review of deposit directions for deposit-taking HFCs, participation of HFCs in various derivative products for hedging purposes, diversification into other financial products, and adoption of technical specifications under the account aggregator ecosystem, as per a report in news agency IANS.
What Does The Draft Circular Propose
The draft circular proposes to review certain directions for deposit-taking NBFCs as part of further harmonizing HFC regulations with those of NBFCs.
The draft circular also provides for more stringent rules for HFCs going forward. Currently, HFCs are subject to easier prudential parameters on deposit acceptance as compared to NBFCs. Since the regulatory concerns associated with deposit acceptance are the same across all categories of NBFCs, it has been decided to move HFCs towards the regulatory regime on deposit acceptance as applicable to deposit-taking NBFCs, the RBI said.
Accordingly, the revised regulations would be applicable to HFCs accepting or holding public deposits, the RBI said.
Current Regulation Status
Also, currently, deposit-taking HFCs are required to maintain 13 per cent of their liquid assets against public deposits held by them. It has now been decided that all deposit-taking HFCs need to maintain liquid assets to the extent of 15 per cent of the public deposits held by them in a phased manner.
As per the plan, deposit-taking HFCs will need to take the percentage of liquid assets to 14 per cent by September 30, 2024 and to 15 per cent by March 31, 2025, the RBI said. It has also been decided that the regulations on safe custody of liquid assets for HFCs will be aligned with those of NBFCs in the interest of harmonizing regulations, the RBI said.
Besides, the proposed regulations seek to harmonise regulations regarding appointment of agents, rate and tenure of deposits, participation in exchange-traded currency derivatives, interest rate futures, credit default swaps, the issue of co-branded credit cards, accounting year and audit, and investment through alternative investment funds, among other issues, as per the draft circular. Comments on the draft circular are invited from NBFCs, HFCs and other stakeholders by February 29, 2024.
(With inputs from agencies)