CRAR cut for mortgage guarantee cos

MUMBAI: The Reserve Bank of India has proposed a lower capital to risk weighted assets ratio (CRAR) for mortgage guarantee companies.

In its modified draft guidelines, the central bank has aligned the CRAR for such companies with non-deposit taking NBFCs at 10%, with the Tier I stipulation reduced to 6%.

This is lower than the earlier guidelines, issued in April, where a mortgage guarantee company was to maintain 12% of its aggregate risk weighted assets as the minimum capital adequacy ratio and at least 8% of its aggregate risk weighted assets as Tier 1 capital.

In the fresh guidelines, RBI has also said that the enhancement of net owned funds of a mortgage guarantee company would be reviewed after three years. This is a change from the first guideline where a guarantee company’s net owned funds were to be augmented to Rs 300 crore within three years of commencement of business.