AMENDMENT TO HOUSING FINANCE COMPANIES

National Housing Bank

(Wholly Owned by the Reserve Bank of India)

New Delhi

HOUSING FINANCE COMPANIES (NHB) DIRECTIONS, 2001

Direction No. NHB.HFC.DIR.9/CMD/2005 dated January 10, 2005

The National Housing Bank having considered it necessary in the public interest and being satisfied that, for the purpose of enabling the National Housing Bank to regulate the housing finance system in the country to its advantage, it is necessary so to do, hereby in exercise of the powers conferred by sections 30A and 31 of the National Housing Bank Act, 1987 (53 of 1987) and all the powers enabling it in this behalf, directs that the Housing Finance Companies (NHB) Directions, 2001 shall with immediate effect, be further amended in the following manner, namely:

1. In paragraph 2(1), the following proviso may be inserted as ( zf )

“ ‘Tiny deposit’ means the aggregate amount of public deposits not exceeding Rs. 10,000/- standing in the name of the sole or the first named depositor in the same capacity in all the branches of the Housing Finance Company.”

2. For Paragraph 12, the following shall be substituted, namely,-

(i) No housing finance company shall repay any public deposit within a period of three months from the date of its acceptance.

(ii) Where a housing finance company at the request of depositor/s repays a public deposit after the period indicated in clause (i) above but before its maturity, it shall pay interest at the following rate:

(a) minimum lock in period	three months
(b) after three months but before six months	no interest
(c) After six months but before the date of maturity.	The interest payable shall be two percent lower than the interest rate applicable to a public deposit for the period for which the deposit has run or if no rate has been specified for that period, then three percent lower than the minimum rate at which the public deposits are accepted by that Housing Finance Company.

(iii) A housing finance company may grant a loan up to seventy-five percent of the amount of public deposit to a depositor after the expiry of three months from the date of public deposit at a rate of interest two percentage points above the interest rate payable on the public deposit.

(iv) It is obligatory on the part of an HFC to intimate the details of maturity of the deposit to the depositor at least two months before the date of maturity of the deposit.

(v) all deposit accounts standing to the credit of sole/first named depositor in the same capacity shall be clubbed and treated as one deposit account for the purpose of premature repayment.

(vi) Provided that in the event of death of a depositor, the public deposit may be paid prematurely to the surviving depositor/s in the case of joint holding with the survivor clause, or to the nominee or legal heir/s with interest at the contracted rate up to the date of repayment.

(vii) For the purpose, HFCs are classified into two categories viz. a problem HFC and a normally run HFC. An HFC, which is normally run HFC, with effect from the date of this notification, can permit premature repayment of a public deposit after the lock-in period at its sole discretion only and premature closure can not be claimed as a matter of right by the depositors. The problem HFCs have been prohibited from making premature repayment of any public deposits or granting any loan against public deposits except in the case of death of the depositor or in the case of tiny deposit up to Rs.10,000/- in entirety or to enable the depositor to meet expenses of an emergent nature up to an amount not exceeding Rs.10,000/-.

A problem HFC is one which:

has refused or failed to meet within five working days any lawful demand for repayment of the matured public deposits; or
intimates the CLB under section 58AA of the Companies Act, 1956, about its default to a small depositor in repayment of any public deposit or part thereof or any interest thereupon; or
approaches the Bank for withdrawal of the liquid asset securities to meet its deposit obligations; or
approaches the Bank for any relief or relaxation or exemption from the provisions of Housing Finance Companies (NHB) Directions, 2001 or from that of Prudential Norms for avoiding default in meeting public deposit or other obligations; or
has been identified by the NHB to be a problem Housing Finance Company either suo moto or based on the complaints from the depositors about non-repayment of public deposits or on complaints from the company’s lenders about non-payment of dues.

3. In paragraph 26, sub-paragraph (3) (a) & (b) under ‘Explanations’, the following shall be substituted, namely,-

(3)

Housing/Project Loans guaranteed by Central/State Governments

Note: Where guarantee has been invoked and the concerned Government has remained in default for a period of more than 90 days after the invocation of the guarantee, a risk weight of 100% should be assigned

Risk weight

Housing loans to individuals secured by mortgage of immovable property, which are classified as standard assets.

Other housing loans

100

4. For Paragraph 39 (1), the following shall be substituted, namely,-

“ Without prejudice to the provisions of paragraph 37, every housing finance company shall submit to the National Housing Bank :

an annual return furnishing the information specified in Schedule I to these Directions with reference to its position as on 31 st March every year and a half yearly return furnishing the information specified in Schedule II to these Directions with reference to its position as on 30 th September and 31 st March every year

further, housing finance companies accepting/holding public deposits, housing finance companies not accepting/holding public deposits but having an asset size of Rs. 100 crores and more, shall submit to the national Housing Bank a quarterly return furnishing the information specified in Schedule III with reference to its position as at the end of every calendar quarter.”

- Sd-

(P.K. Gupta)

Chairman and Managing Director