Deposit-taking housing finance companies (HFCs) are unlikely to face difficulty in complying with the Reserve Bank of India's (RBI) revised norms for raising public deposits issued on August 12, 2024.
A CRISIL Ratings analysis of the 121 HFCs accepting public deposits indicates most of them are de facto compliant with the revised guidelines on public deposits and liquid assets.
Along with various other operational measures, the revised norms contain three key amendments pertaining to HFCs accepting public deposits.
First, the minimum proportion of liquid assets held against public deposits by HFCs needs to be increased in a gradual manner from 13% currently to 14% by January 1, 2025, and to 15% by July 1, 2025. Unencumbered approved securities held as a percentage of public deposits have also been increased.
Second, the maximum quantum of public deposits held by deposit-taking HFCs has been reduced from 3.0 times to 1.5 times of net owned funds with immediate effect.
Third, the maximum tenure of public deposits raised by HFCs has been reduced from 10 years to 5 years with immediate effect.
In general, the reliance on public deposits is limited for HFCs, with only 12 out of 94 HFCs2 having a deposit-taking license. Total public deposits held by deposit-taking HFCs is estimated at ~Rs 25,000 crore, constituting ~5% of their total borrowings; however, for 3 HFCs, this is higher than 10%.
Says Subha Sri Narayanan, Director, CRISIL Ratings, "Most deposit-taking HFCs already comply with the new norms. A couple of them may have to enhance their on-book liquidity to adhere to the 15% guideline and/or align their incremental deposits to manage the ratio of their public deposits to net owned funds. To be sure, the lowering of the maximum tenure of deposits will reduce the flexibility that HFCs have to manage their asset liability maturity profiles. However, most HFCs do not have a sizeable portion of over-5-year-maturity deposits in the borrowing mix." |
