The Reserve Bank of India (RBI) came out with a slew of directions related to maintenance of liquidity coverage ratio, risk management, asset classification, and loan-to-value ratio, among others, for housing finance companies (HFCs). The central bank said these directions, which shall come into force with an immediate effect, are aimed at preventing the affairs of any HFCs from being conducted in a manner detrimental to the interest of investors and depositors.
“All non-deposit taking HFCs with asset size of Rs 100 crore and above and all deposit-taking HFCs (irrespective of asset size) shall pursue liquidity risk management, which inter alia should cover adherence to gap limits, making use of liquidity risk monitoring tools and adoption of a stock approach to liquidity risk,” the RBI said.
The board of each HFC would ensure that the guidelines are adhered to. The RBI said HFCs shall maintain a liquidity buffer in terms of liquidity coverage ratio (LCR), which will promote their resilience to potential liquidity disruptions by ensuring that they have sufficient high-quality liquid assets (HQLA) to survive an acute liquidity stress scenario lasting for 30 days.
All non-deposit-taking HFCs with an asset size of Rs 10,000 crore and above and all deposit-taking HFCs irrespective of their asset size will have to achieve a minimum LCR of 50 per cent By December 1, 2021, and gradually to 100 per cent by December 1, 2025.
“Any shortfall in the maintenance of the 50 per cent LTV occurring on account of the movement in the share price shall be made good within seven working days,” the central bank said.