What changed
Government of India, via Gazette Notification S.O. 2405(E) dated June 17, 2021, has notified HFCs registered under Section 29A(5) of the National Housing Bank Act, 1987 and having assets worth ₹100 crore and above as 'Financial Institution' under Section 2(1)(m)(iv) of SARFAESI Act. Consequently, the criteria prescribed under Para 105 of the Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021 are withdrawn with immediate effect.
What it means for you
HFCs meeting the new asset threshold are now directly notified as 'Financial Institution' under Section 2(1)(m)(iv) of SARFAESI Act, which may enable them to enforce security interests under that Act. The earlier RBI criteria are no longer applicable.
What you must do
- Verify if your HFC meets the asset threshold of ₹100 crore or more to be covered under the GoI notification.
- Note that the criteria under Para 105 of the Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021 have been withdrawn.
- Review the implications of being notified as a 'Financial Institution' under SARFAESI Act for your recovery processes.
Who it affects
All Housing Finance Companies (HFCs) registered under Section 29A(5) of the National Housing Bank Act, 1987, HFCs with assets of ₹100 crore and above, Legal and recovery departments of HFCs
What is the new asset threshold for HFCs to be considered financial institutions under SARFAESI Act?
HFCs must have assets of ₹100 crore or more, as per the GoI Gazette Notification S.O. 2405(E) dated June 17, 2021.
Does this notification replace the earlier RBI criteria?
Yes, the criteria prescribed under Para 105 of the Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021 have been withdrawn with immediate effect.
What benefits do HFCs get from being notified as financial institutions?
They are notified as 'Financial Institution' under Section 2(1)(m)(iv) of SARFAESI Act, which may enable them to enforce security interests under that Act.