Housing Finance Company Registration

Housing Finance Company are registered and regulated by National Housing Bank (NHB). National Housing Bank is set-up with the objective of promoting and regulating Housing Finance Institutions in India, NHB is wholly owned by Reserve Bank of India.

In order to register a housing finance company there must be a registration of a company under Companies Act 2013, thereafter the company proceed for application to grant registration for Housing Finance Company before the National Housing Board (NHB). There is requirement of minimum net owned fund of INR 10 crore or more.

Post granting Housing Finance Company registration, such HFC may proceed further to obtain a credit rating from any of the recognized credit rating agency in India. This credit rating determines the risk and viability of the HFC. Those HFC having credit rating not below ‘A’ category can accept term deposits from general public up-to five times of its net owned fund subject to compliance of other prudential norms of accepting deposits. Other HFC having credit rating below ‘A’ can accept term deposit only up-to two times of its net owned fund or INR 10 crores whichever is lower. HFC’s cannot accept demand deposits, only acceptance of term deposit is permissible. These deposits accepted by HFC has maximum ceiling interest rate of 12.5%, every HFC can regulate its own interest rate on deposit subject to maximum ceiling rate. Unlike in case of Banks, DICGC insurance cover (Deposit insurance and Credit Guarantee Corporation) is not available to the depositors of HFC’s.

During the entire lifetime the Housing Finance company shall maintain capital adequacy ratio minimum of 15%, in case of infusion of capital to maintain the capital adequacy ratio, same shall be done after intimating National Housing Board (NHB)
Post Registration requirement to be complied by the HFC’s are:

1. At any point of time its net owned fund shall not fall below INR 10 crores.

2. All HFC shall operate and function as per the guidelines of NHB, it can grant credit to general purpose for the purpose of Housing Credit facility as per the criteria of NHB.

3. HFC’s shall maintain its Capital adequacy of 15% or more and it shall be able to honour and pay its present and future depositors in full.

4. The management of the HFC shall be of good standing and their acts shall not be prejudicial to public interest or the interest of its depositors.

5. All HFC’s shall make reserve fund and provisions to adhere the compliance of National Housing Board (NHB)

6. All HFC’s shall adhere the prudential norms of lending and accepting deposits.

7. All HFC’s shall make proper disclosures as per the disclosure requirement specified by the NHB.

8. All HFC’s having assets of INR 50 crore or more shall constitute an Audit Committee comprising not less than 3 non-executive directors on the board.

Return Compliance to be met by the Housing Finance Company are:

1. Annual Return comprising of Audited Financial Statement together with Board’s Report, Auditor’s Report and other disclosure requirement.

2. Half yearly return on prudential norms to adhere the provisions and reserves made and to check the compliance met in lending and accepting deposits.

3. Quarterly return on maintenance of Liquid Assets

4. Auditor Certificate on annual basis to certify the capability of HFC to repay its term deposits.

5. Copy of advertisement for accepting deposits from general public need to intimate to NHB.

6. Any other information regarding change in management, change in registered office or any alteration need to be properly intimated to NHB.

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