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RBI to issue revised norms for HFCs

HFCs will henceforth be treated as one of the categories of non-banking financial companies for regulatory purposes

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Reserve Bank of India (RBI) has said that housing finance companies (HFCs) will be treated as a category of non-banks for which it will release a revised regulator framework.

RBI move follows the Budget announcement which takes away the regulatory powers from the National Housing Bank (NHB). The Finance Act, 2019, amended the National Housing Bank Act, 1987, conferring certain powers for regulation of HFCs with the Reserve Bank of India.

“HFCs will henceforth be treated as one of the categories of non-banking financial companies (NBFCs) for regulatory purposes. Reserve Bank of India will carry out a review of the extant regulatory framework applicable to HFCs and come out with revised regulations in due course," the central bank said.

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  • HFCs will henceforth be treated as one of the categories of non-banking financial companies (NBFCs) for regulatory purposes
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  • RBI will carry out a review of the extant regulatory framework applicable to HFCs and come out with revised regulations in due course 

HFCs will have to comply with the directions issued by NHB till the central bank issues a revised framework.

NHB will continue to carry out supervision of HFCs, which will continue to submit various returns to NHB. The grievance redressal mechanism with regard to HFCs will also continue to be with NHB.

“A housing finance institution, which is a company, desirous of making an application for registration under sub-section 2 of section 29A of the National Housing Bank Act, 1987 (as amended by Act 23 of 2019) may approach the Department of Non-Banking Regulation, Reserve Bank of India," the RBI said on Tuesday.

Finance minister Nirmala Sitharaman in her Budget speech on June 5 had proposed an amendment to Section 45-IA of the RBI Act 1934 in the Finance Bill.

The amended Act empowers the central bank to supersede the Board of NBFCs (other than those owned by the government) and give it the freedom for resolution of financially troubled NBFCs through merger or splitting them into viable and non-viable units called bridge institutions. RBI can now also remove auditors, call for audit of any group company of an NBFC and have a say over the compensation of the senior management.

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