Economy News

Reserve Bank of India issued directions for housing finance companies

The Reserve Bank of India came out with a thread of directions regarding the maintenance of liquidity coverage ratio, asset clarification, among many others.

The central bank has issued directions for housing finance companies in India covering up all the mentioned elements.

RBI said that these directions will come with an immediate effect. It will prevent the affairs of any HFCs from being detrimental to the interest of both the depositors and investors.

On Wednesday, the Reserve Bank of India has issued a Master Direction-Non-Banking Financial Company-Housing Finance Company Directions 2021.

HFC is an NBFC whose financial assets comprises or constitutes at least 60 percent of its own total assets as per the core meaning.

RBI announced that the HFCs will maintain a liquidity buffer for the LCR or liquidity coverage ratio.

This step will promote the resilience to the potential liquidity disruptions. It will further ensure high-quality liquid asset to survive in case of acute liquidity stress scenario continuing for 30 days.

Now, non-deposit taking HFCs with asset size of equal or above Rs 10,000 crore are required to achieve minimum LCR of 50%.

Also, the list also includes all deposit taking HFCs regardless of their asset size. The minimum timeline to attain this level is December 1, 2021. Also, further this percentage will increase to 100% by December 1, 2025.

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