The Reserve Bank of India has issued a notification to revise the Master Direction on Housing Finance Company (Reserve Bank) Directions, 2021. Since the previous version of the Master Direction has been significantly amended, it has been replaced rather than showing the changes in track mode.
The changes include the following:
- Housing Finance Companies (“HFCs”) will now be required to finalize their balance sheet within 3 months from the date to which it pertains. The revised direction also provides HFC an opportunity to extend the date of its balance sheet as per the provisions of Companies Act, with prior approval of NHB before approaching Registrar of Companies (RoC) for this purpose.
- Deposit taking HFCs will now be required to fix Board-approved internal limits separately within the limit of direct investment, for investments in unquoted shares of another company which is not a subsidiary company or a company in the same group of the HFC. Such Board-approved internal limit shall form part of overall limits and sub-limits for exposure to capital market for deposit taking HFCs.
- The revised direction clarifies that provisioning on investments will be required only to the extent of investment by the HFC in the Alternative Investment Fund (“AIF”) which is further invested by the AIF in the debtor company, and not on the entire investment of the HFC in the AIF scheme.
- Deposit taking HFCs holding deposits in excess of the limit will not be allowed to accept fresh public deposits or renew existing deposits till they conform to the limit. However, the existing excess deposits will be allowed to run off till maturity.
- The instructions contained in paragraph 30 of the Master Direction – Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 regarding opening of branches and appointment of agents to collect deposits will apply mutatis-mutandis to deposit taking HFCs.
- The instructions contained in para 33 of Master Direction – Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 on Safe Custody of Liquid Assets will apply mutatis-mutandis to deposit taking HFCs.
- Deposit taking HFCs intending to offer green deposits to their customers shall comply with the ‘Framework for acceptance of Green Deposits’ dated April 11, 2023, as amended from time to time.
- The periodicity of Information System Audit to be conducted by the audit committee has been changed from once in 2 years to the periodicity prescribed in Master Direction on Information Technology Governance, Risk, Controls and Assurance Practices dated November 07, 2023, as amended from time to time.
- The Guidelines on Private Placement of Non-Convertible Debentures (NCDs) prescribed under Chapter XI has been done away with. Instead the instructions regarding “Raising Money through Private Placement by NBFCs” as contained in para 58 of the Master Direction – Reserve Bank of India (Non- Banking Financial Company – Scale Based Regulation) Directions, 2023 (as amended from time to time) will apply mutatis-mutandis to HFCs.
A copy of the notification is linked below for ease of reference.
Source: Reserve Bank Of India
