REPORT ON TREND AND PROGRESS OF HOUSING IN INDIA

REPORT ON TREND AND PROGRESS OF HOUSING IN INDIA - JUNE, 1999

ANNEXURE I
Housing Finance Companies (NHB), Directions, 1989 as amended till January 1, 1999

NATIONAL HOUSING BANK
(Wholly owned by Reserve Bank of India)
Bombay - 400 023, the 26th June 1989
No. NHB.HFC.DIR.1/CMD-89 - The National Housing Bank, as the principal agency, having considered it necessary in the public interest to give the directions mentioned below, hereby, in exercise of the powers conferred by Sections 30 and 31 of the National Housing Bank Act, 1987 (53 of 1987) and of all the powers enabling it in this behalf, gives to every housing finance company, the Directions hereinafter specified.

PART 1 - PRELIMINARY
1. Short title and commencement of the Directions
These Directions shall be known as the Housing Finance Companies (NHB) Directions, 1989. They shall come into force with effect from the 26th June, 1989 and any reference in these Directions to the date of commencement thereof shall be deemed to be a reference to that date.

2. Definitions
(1) In these Directions, unless the context otherwise requires,
(a) "Company" means a company as defined in Section 45 I (a) of the Reserve Bank of India Act, 1934 (2 of 1934) but does not include a company which is being wound up under any law for the time being in force;

(b) "Banking Company" means a banking company as defined in Section 5(c) of the Banking Regulation Act, 1949 (10 of 1949);

[(c) Housing Finance Company' means a company incorporated under the Companies Act, 1956 (1 of 1956) which primarily transacts or has as its principal object, the transacting of the business of providing finance for housing, whether directly or indirectly.] 6(1)
(d) "Deposit" shall have the same meaning as assigned to it in Section 45 I (bb) of the Reserve Bank of India Act, 1934 (2 of 1934);

11(1)(i)[(da) "public deposit" means a deposit but does not include the following, namely:-
(i) any amount received from the Central Government or a State Government or any amount received from any other source and whose repayment is guaranteed by the Central Government or a State Government or any amount received from a local authority or any public housing agency, or a foreign Government or any other foreign citizen, authority or person;

6(1) Substituted by Notification No. NHB.HFC.DIR.6/CMD-94 dated 07.02.1994

11(1)(i) Inserted by Notification No. NHB.HFC.DIR.11/CMD-99 dated 01.01.1999
(ii) any amount received from the National Housing Bank, established under the National Housing Bank Act, 1987 (53 of 1987), or the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964) or the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956) or the General Insurance Corporation of India and its subsidiaries established in pursuance of the provisions of section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) or the Small Industries Development Bank of India established under the Small Industries Development Bank of India Act, 1989 (39 of 1989) or the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or National Bank for Agriculture and Rural Development established under the National Bank for Agriculture and Rural Development Act, 1982 or an Electricity Board constituted under the Electricity (Supply) Act, 1948 or the Tamil Nadu Industrial Investment Corporation Ltd., or the National Industrial Development Corporation of India Ltd., or the Industrial Credit & Investment Corporation of India Ltd., or the Industrial Finance Corporation of India Ltd., or the Industrial Investment Bank of India Ltd., or State Trading Corporation of India Ltd., or the Rural Electrification Corporation Ltd., or the Minerals and Metals Trading Corporation of India Ltd., or the Agricultural Finance Corporation Ltd., or the State Industrial and Investment Corporation of Maharashtra Ltd., or the Gujarat Industrial Investment Corporation Ltd.,or Asian Development Bank or International Finance Corporation or the Overseas Economic Cooperation Fund (OECF) or Kreditanstalt für Wiederaufbau (KfW) or any other institution that may be specified by the National Housing Bank in this behalf;
(iii) any amount received by a housing finance company from another company;
(iv) any amount received by way of subscription to any share, stock, bonds or debentures pending the allotment of the said shares, stock, bonds or debentures and any amount received by way of calls in advance on shares, in accordance with the Articles of Association of the housing finance company so long as such amount is not repayable to the members under the Articles of Association of the housing finance company;
(v) any amount received from a person who at the time of receipt of the amount was a Director of the housing finance company or any amount received from its shareholders by a private housing finance company or by a private housing finance company which has become a public housing finance company under section 43A of the Companies Act, 1956 and continues to include in its Articles of Association provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 of the Companies Act, 1956 (1 of 1956):

Provided that the Director or shareholder, as the case may be, from whom the money is received furnishes to the housing finance company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others;

(vi) any amount raised by the issue of bonds or debentures secured by the mortgage of any immovable property of the housing finance company; or by any other asset or with an option to convert them into shares in the housing finance company provided that in the case of such bonds or debentures secured by mortgage of any immovable property or secured by other assets, the amount of such bonds or debentures shall not exceed the market value of such immovable property/other assets;

(vii) any amount brought in by the promoters by way of unsecured loan in pursuance of stipulations of lending institutions subject to the fulfilment of the following conditions, namely :-
(a) the loan is brought in pursuance of the stipulation imposed by the lending public financial institution in fulfilment of the obligation of the promoters to contribute such finance,
(b) the loan is provided by the promoters themselves and/or by their relatives, and not from their friends and business associates, and
(c) the exemption under this sub-clause shall be available only till the loan of the lending public financial institution is repaid and not thereafter;
(db) "lending public financial institution" means -
(i) a public financial institution specified in or under section 4A of the Companies Act, 1956 (1 of 1956); or
(ii) a State Financial Corporation or a State Industrial Investment Corporation; or
(iii)a scheduled commercial bank; or
(iv)the General Insurance Corporation of India established in pursuance of the provisions of section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972); or any other Institution which the National Housing Bank may, by notification, specify in this behalf;]11(1)(i)
(e) "Depositor" means any person who has made a deposit with the housing finance company;
(f) "Free Reserves" shall include the balance in the share premium account, capital and debenture redemption reserves and any other reserve shown or published in the balance sheet of the company and created through an allocation of profits, not being (1) a reserve created for repayment of any future liability or for depreciation in assets or for bad debt or (2) a reserve created by revaluation of the assets of the company;
[(g) "Public housing agency" shall include any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both.]5(1)(b)

11(1)(i) Inserted by Notification No. NHB.HFC.DIR.11/CMD-99 dated 01.01.1999
5(1)(b) Inserted by Notification No. NHB.HFC.DIR.5/CMD-93 dated 30.06.1993

[(h)]5(1)(a) ["securities" means securities as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);]11(1)(ii)
[(i)]5(1)(a) Words or expressions used but not defined herein and defined in the National Housing Bank Act, 1987 (53 of 1987) shall have the same meaning as assigned to them in that Act. Any other words or expressions not defined herein or in the National Housing Bank Act, 1987 (53 of 1987) shall have the same meaning as assigned to them in the Reserve Bank of India Act, 1934 (2 of 1934), Banking Regulation Act, 1949 (10 of 1949) and the Companies Act, 1956 (1 of 1956);

(2) (a) If any question arises as to whether a company is a financial institution or not, such question shall be decided by the National Housing Bank in consultation with the Central Government.
(b) If any question arises as to whether a company is a housing finance company, the same shall be decided by the National Housing Bank having regard to the business primarily transacted by the company and other relevant factors.
3. [ ...... omitted ]11(2)