What changed
RBI has decided to harmonise the regulatory framework for deposit-taking HFCs with that of NBFCs. Specifically, the minimum liquid asset requirement for deposit-taking HFCs will increase from the current 13% to 15% of public deposits, implemented in two phases by July 1, 2025. Additionally, regulations on the safe custody of these liquid assets will be aligned with NBFC norms.
What it means for you
For deposit-taking HFCs, this means tighter liquidity requirements and closer alignment with NBFC prudential norms. The phased increase in liquid asset ratio will require HFCs to hold more unencumbered approved securities, potentially impacting their lending capacity and profitability. Banks and lenders should note that this harmonisation reduces regulatory arbitrage between HFCs and NBFCs, creating a more level playing field.
What you must do
- Review your HFC's current liquid asset holdings and plan for phased increase to 15% by July 1, 2025.
- Ensure compliance with revised safe custody norms for liquid assets as per NBFC guidelines.
- Update internal policies and systems to reflect the new deposit acceptance prudential parameters.
- Communicate changes to treasury and compliance teams to manage the transition smoothly.
Who it affects
Deposit-taking Housing Finance Companies (HFCs), Banks and lenders with exposure to HFCs
When do the revised regulations take effect?
The revised regulations are applicable from January 1, 2025, with the liquid asset requirement increasing in two phases: to 14% by January 1, 2025, and to 15% by July 1, 2025.
What is the key change for deposit-taking HFCs?
The minimum liquid asset requirement is being raised from 13% to 15% of public deposits, aligning HFCs with NBFC norms. Safe custody rules for these assets are also being harmonised.
Does this affect all HFCs or only those taking deposits?
The changes specifically apply to HFCs that accept or hold public deposits. Non-deposit-taking HFCs are not directly impacted by these particular provisions.