By
Registered Post
As
you are aware, the provisions of the National Housing Bank
Act, 1987 and the Housing Finance Companies (NHB) Directions
framed thereunder are to be strictly observed by the HFCs
and their compliance ensured. It is, however, observed during
the off-site surveillance and on site supervision, that some
of the HFCs are not paying adequate attention to this mandatory
compliance and continue to contravene the provisions of both
National Housing Bank Act and Directions. Housing Finance
Companies are advised to ensure compliance with these provisions
and prevent recurrence of any contraventions.
In
this context, attention of the HFCs is also invited to Section
52A of the Act ibid in accordance with which NHB is empowered
to impose penalty on a housing finance company for any contravention
of the Act or the Directions made thereunder. It has been
decided by the Bank that these penal provisions for non-compliance
shall become effective from October 1, 2004.
The
penalty for such contraventions in respect of various regulatory
norms is given in the Annexure. The guidelines for levying
penalty shall be as under:
a) A show-cause notice will be issued by NHB to the company concerned
clearly specifying the nature of contravention and the penalty payable
by the company within the reasonable time period not exceeding twenty
one days from the date of issue of letter and seeking reasons for non-compliance
with the regulatory requirement.
b)
Once a decision is taken by NHB to levy the penalty, a notice
demanding penalty shall be issued to the Company concerned
allowing time of thirty days for paying the penalty.
c)
In the event of the company not furnishing a reply to the
show cause notice issued, within five working days after
the stipulated time, a notice demanding penalty shall be
issued to the company by the NHB.
d)
If the company fails to pay the penalty within the prescribed
period stipulated in the demand notice, one more opportunity
will be given by issuing reminder giving seven more days
for the company to pay the penalty. In the event of failure
of payment, the penalty will be levied on a direction made
by a principal civil court having jurisdiction of the area
where the Registered or the Head Office of the company is
situated.
Please acknowledge receipt.
Annexure
to Circular No. NHB(ND)/DRS/POL-No.04/2004-05
Dated September 6, 2004
(1)
Nature of contravention to regulatory requirement |
(2)
Penalty |
(3)
Penalty under section |
1.
For shortfall in maintenance of liquid assets as
a percentage to public deposits |
Penalty
as specific in the Act. |
29B(4) |
2.
Not creating reserve fund in terms of section 29C
of the Act |
Penalty
not exceeding rupees five thousands shall be levied. |
52A
(1) (a) |
3.
Appropriation of reserve fund and not reporting to
NHB within the stipulated period. |
Penalty
not exceeding rupees two thousand, each time the
lapse occurs, shall be levied. |
52A
(1) (a) |
4.
Appropriation of reserve fund for purposes not specified
by NHB |
Penalty
of rupees five thousand for the first time offence
shall be levied. For second and subsequent contraventions,
a maximum fine of rupees five thousands shall be
levied. |
52A
(1) (a) |
(1)
Nature of contravention to regulatory requirement |
(2)
Penalty recommended under the policy |
(3)
Penalty proposed under section |
| 5.
Exceeding ceiling on public deposits |
For
first time contravention, penalty not exceeding rupees
one lakh or twice the amount involved in such contravention
whichever is more shall be levied. If not regularised
within 30 days from the date on which notice demanding
penalty is issued, the contravention shall be treated
as continuing one and further penalty not exceeding
rupees ten thousand for every day, after the first,
during which the contravention continues shall be
levied.For second and subsequent contraventions,
the maximum penalty as prescribed in the Act, i.e.,
penalty not exceeding rupees five lakhs or twice
the amount involved in such contravention whichever
is more, shall levied and if the contravention is
continuing, further penalty not exceeding rupees
twenty-five thousand for every day, after the first,
during which the contravention continues shall be
levied. [If the excess deposit is due to down gradation
of credit rating or the company becoming ineligible
to accept/hold public deposits, no penalty is applicable
as long as the company reduces the excess deposit
in terms of the relevant provisions of the directions] |
52A
(1) (b) |
| 6.
Exceeding ceiling on total borrowings |
For
first time contravention, a penalty not exceeding
rupees two thousand shall be levied and time up to
ninety days from the date of issuing notice demanding
penalty shall be allowed for regularising the contravention.
If not regularised within such time a penalty not
exceeding Rs 50/- shall be levied for every day till
the overall borrowing is brought within the ceiling.For
second and subsequent contraventions, a penalty not
exceeding rupees five thousand shall be levied and
time up to ninety days from the date of issuing notice
demanding penalty may be allowed for regularising
the contravention. If not regularised within such
time a penalty not exceeding rupees one hundred shall
be levied for every day till the overall borrowing
is brought within the ceiling. |
52A
(1) (b) |
7.
Not reporting down gradation of credit rating below
the minimum prescribed rating within 15 days |
Penalty
not exceeding rupees five thousand shall be levied
every time the contravention takes place. |
52A
(1) (a) |
8.
Accepting public deposits for less than 1 year or
more than 7 years |
penalty
not exceeding rupees five lakhs or twice the amount
involved in such contravention, whichever is more;
and where such contravention or default is a continuing
one, further penalty not exceeding rupees twenty-five
thousand for every day, after the first, during which
the contravention or default continues |
52A
(1) (b) |
9.
Failure to specify complete information as specified
in the directions in deposit application forms |
Penalty
not exceeding rupees two thousand shall be levied. |
52A
(1) (a) |
10.
Accepting deposits without introduction |
A
penalty not exceeding rupees five thousand shall
be levied for each such deposit which has been accepted
without introduction. |
52A
(1) (a) |
11.
Not maintaining deposit registers |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
12.
Maintaining deposit register without furnishing all
the information specified in the directions. |
Penalty
not exceeding rupees two thousand shall be levied. |
52A
(1) (a) |
13.
Keeping the consolidated deposit register for all
the branches at a place other than the registered
office without complying with the provisions of sub-paragraph
(2) of paragraph 9 of the Directions. |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
14.
Not including information specified in the directions
in the Board’s Report |
A
penalty not exceeding rupees two thousand shall be
levied. |
52A
(1) (a) |
15.
Exceeding the ceiling on interest rate |
A
penalty not exceeding rupees five thousand shall
be levied |
52A
(1) (a) |
16.
Exceeding the ceiling on brokerage |
A
penalty not exceeding rupees five thousand shall
be levied |
52A
(1) (a) |
17.
Contravening provisions relating to payment of interest
on overdue deposit |
A
penalty not exceeding rupees five thousand shall
be levied |
52A
(1) (a) |
18.
Contravention of provisions relating to premature
withdrawal of deposits and loans against deposits |
A
penalty not exceeding rupees five thousand shall
be levied |
52A
(1) (a) |
19
Contravening provisions relating to renewal of deposit
before maturity |
A
penalty not exceeding rupees five thousand shall
be levied. |
52A
(1) (a) |
20.
Not entrusting securities to the designated scheduled
commercial bank excluding regional rural bank or
a cooperative bank |
A
penalty not exceeding rupees five thousand shall
be levied |
52A
(1) (a) |
21.
Entrusting securities with other approved agencies
without obtaining approval from NHB in writing |
A
penalty not exceeding rupees five thousand shall
be levied |
52A
(1) (a) |
22.
Not filing SILA for soliciting deposits |
Penalty
not exceeding rupees five lakhs or twice the amount
involved in such contravention where the amount is
quantifiable, whichever is more; and where such contravention
or default is a continuing one, further penalty not
exceeding rupees twenty-five thousand for every day,
after the first, during which the contravention or
default continues shall be levied. |
52A
(1) (b) |
23.
Delayed filing of SILA. |
A
penalty not exceeding rupees five thousand shall
be levied |
52A
(1) (a) |
24.
Not fully specifying information as provided for
in the directions in the advertisement or SILA |
Penalty
not exceeding rupees five thousand shall be levied |
52A
(1) (a) |
25.
Accepting deposits after expiry of the validity period
of SILA |
Penalty
not exceeding rupees one lakh or twice the amount
involved in such contravention where the amount is
quantifiable, whichever is more; and where such contravention
or default is a continuing one, further penalty not
exceeding rupees twenty-five thousand for every day,
after the first, during which the contravention or
default continues. |
52A
(1) (b) |
26.Giving
incomplete/wrong information in SILA or advertisement |
Penalty
not exceeding rupees five thousand shall be levied |
52A
(1) (a) |
27.
Not informing in writing the intention to open branch
or office before opening |
Penalty
not exceeding rupees two thousand shall be levied |
52A
(1) (a) |
28.
Failing to inform opening a branch or office even
after opening the same. |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
29.
Closing branch/office without publishing such intention
in news papers before 90 days of the proposed closure |
Penalty
not exceeding rupees five thousand shall be levied |
52A
(1) (a) |
30.
Closing branch/office without advising NHB such intention
before 90 days of the proposed closure |
Penalty
not exceeding rupees five thousand shall be levied |
52A
(1) (a) |
(1)
Nature of contravention to regulatory requirement |
(2)
Penalty recommended under the policy |
(3)
Proposed under section |
31.
Contravening income recognition norms |
Penalty
not exceeding rupees five thousand shall be levied for each
such contravention. |
52A
(1) (a) |
32.
Contravening classification norm for investments |
Penalty
not exceeding rupees five thousand shall be levied for each
such contravention. |
52A
(1) (a) |
33.
Contravening valuation norm for investments |
Penalty
not exceeding rupees five thousand shall be levied for each
such contravention. |
52A
(1) (a) |
34.
Contravening asset classification norm |
Penalty
not exceeding rupees five thousand shall be levied for each
such contravention. |
52A
(1) (a) |
35.
Wrong classification of rescheduled loans |
Penalty
not exceeding rupees five thousand shall be levied for each
such contravention. |
52A
(1) (a) |
36.
Shortfall in provisioning |
Penalty
not exceeding rupees five thousand shall be levied for each
such contravention. |
52A
(1) (a) |
37.
Contravening norms relating to disclosure in balance sheets |
Penalty
not exceeding rupees five thousand shall be levied for each
such contravention |
52A
(1) (a) |
38.
Assigning wrong risk weights to assets while computing CAR
resulting in inflated CAR |
Penalty
not exceeding rupees five thousand shall be levied for each
such contravention. |
52A
(1) (a) |
39.
Exceeding ceiling on investment in real estates other than
for own use |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
40.
Exceeding exposure to capital market |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
41.
Contravening credit concentration norm |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
42.
Lending against own shares |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
43.
Not constituting Audit Committee |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
44.
Constituting Audit Committee contravening provisions of the
directions relating to Audit Committee. |
Penalty
not exceeding rupees two thousand shall be levied. |
52A
(1) (a) |
45.
Not furnishing audited accounts within due dates (If prior
permission has been obtained from ROC for extending the time
frame as per the Companies Act, 1956, no penalty is to be levied
since the due date also gets shifted automatically) |
Penalty
not exceeding rupees five thousand shall be levied |
52A
(1) (a) |
46.
Not furnishing Director’s Report along with audited accounts |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
47.
Deposit accepting company not furnishing Auditor’s certificate
in terms of paragraph 38 of the directions |
Penalty
not exceeding rupees two thousand shall be levied if the certificate
is not made available within the due date, i.e., 30th September
of every year. |
52A
(1) (a) |
48.
HFC not furnishing to NHB the auditor’s report containing
matters specified in paragraph 30 & 31 of the directions
in the auditor’s report |
Penalty
not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
49.
Non-submission of returns |
If
returns due are not furnished by the time the next such return
is due, it shall be treated as non-submission of the return.
Penalty not exceeding rupees five thousand shall be levied. |
52A
(1) (a) |
50.
Delayed submission of returns |
Penalty
not exceeding rupees one thousand shall be levied if returns
are not submitted within 15 days of the due date specified
in the return each time. |
52A
(1) (a) |
51.
Submission of incomplete returns or submission of returns in
out dated formats |
Penalty
not exceeding rupees one thousand shall be levied for the first
offence which may be increased to a maximum of rupees two thousand
for subsequent lapses. |
52A
(1) (a) |
52.
Not furnishing information regarding change of address, change
of directors, specimen signature of directors & principal
officers etc., in terms paragraph 39(2) of the directions |
Penalty
not exceeding rupees one thousand shall be levied for the first
lapse which may be increased to a maximum of rupees five thousand
for subsequent each lapses. |
52A
(1) (a) |
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