NHB amends Housing Finance Companies (NHB) Directions, 2010

Jul 18, 2018 | by Avantis RegTech Legal Research Team

Industry Specific Compliance

The National Housing Bank (NHB) vide notification dated July 12, 2018 and with the purpose of enabling it to regulate the housing finance system of the country to its advantage, has amended thee Housing Finance Companies (NHB) Directions, 2010 with immediate effect. The amendments made are as follows:

1.       Amendment to Paragraph 2:

In sub-paragraph (1) of Paragraph 2 of the principal Directions, after clause (d), the following clause has been inserted –

"(da) "companies in the same group" shall mean an arrangement involving two or more entities related to each other through any of the following relationships:

 (i) Subsidiary - Parent, Joint Venture, Associate, A Related Party as defined under the Companies Act, 2013, Indian Accounting Standards (Ind AS),

(ii) Promoter - Promotee (as provided in the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011) for listed companies,

 (iii) Common Brand Name, and

 (iv) investment in equity shares of 20% and above;"


2.      Amendment to Paragraph 32:

I.                    In sub-paragraph (1) of Paragraph 32 of the principal Directions, the following has been inserted –

"Provided that the ceiling on the investment in shares of another company shall not be applicable in respect of investment in the equity capital of an insurance company up to the extent specifically permitted, in writing, by National Housing Bank.

Provided further that nothing contained in sub-paragraph (1) shall apply to-

(a) investments of a housing finance company in shares of

(i)     its subsidiaries;

(ii)   companies in the same group, to the extent they have been reduced from owned funds for the calculation of net owned fund and

(b) the book value of debentures, bonds, outstanding loans and advances (including hire-purchase and lease finance) made to, and deposits with

(i)     subsidiaries of a housing finance company; and

(ii)   Companies in the same group, to the extent they have been reduced from owned fund for the calculation of net owned fund.

Provided further that the exposure of a housing finance company to group companies involved in real estate construction/purchase and sale of real estate activities shall be subject to the ceiling applicable to credit/investment as contained in sub-paragraph (1).”

II.                  Sub-paragraph (2) of Paragraph 32 of the principal Directions shall stand deleted.

III.                After note (5), the following Notes shall be inserted:

"(6) Owned fund shall mean 'owned fund' as defined under sub-paragraph (l)(w) of paragraph 2 of these Directions and with respect to its position as per the published accounts as on March 31st of the previous year.

(7) The infusion of capital, after such published balance sheet date may be taken into account for determining the exposure ceiling but the housing finance company shall not take exposure in excess of the ceiling in anticipation of infusion of capital at a future date. The Housing Finance Company shall furnish to the National Housing Bank, statutory auditor's certificate on completion of the augmentation of capital before reckoning the same for above purpose.

(8) Other accretions to capital funds by way of quarterly profits etc., shall not be eligible to be reckoned to compute 'owned fund' for the purpose of determining the exposure ceiling."

[Notification No. NHB.HFC.DIR.21/MD&CEO/2018]

URL: http://nhb.org.in/wp-content/uploads/2016/10/NHB.HFC_.DIR_.21-MDCEO-2018.pdf


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