Revised HFC Risk Weights to Facilitate Capital Release of 2-2.5%

Synopsis:

The Reserve Bank of India (RBI) has been harmonizing Housing Finance Companies (HFC) guidelines in line with guidelines for NBFCs and this latest circular is a part of the draft regulations released in January 2024. The circular aligns the deposit taking HFC norms with the norms of deposit taking NBFCs. These norms for deposit taking HFCs would increase the liquidity buffers and encourage further diversification of liabilities profile. CareEdge Ratings believes the liquidity and liability profile of large deposits taking HFCs is comfortable to adhere to changes suggested under the regulations.

A recent review of risk weights for undisbursed amount of loans is expected to free up capital for HFCs in the range of 2% to 2.5%; expected capital benefit is higher for HFCs having greater share of individual housing loans.

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