HFCs will be required to ensure that full asset cover is available for public deposits they accept at all times, and ensure that they obtain “investment grade” rating from credit rating agencies at least once a year, the central bank said in a statement.
Mortgage lenders “will not renew existing deposits or accept new deposits until they obtain an investment-grade credit rating,” he added.
Public deposits accepted or renewed by HFCs should be repayable after a period of 12 months or more, but not later than 60 months, it said.
It has also aligned the rules on branches and designation of agents for taking deposits, under which HFCs having branches or agents outside the state of their registration will not accept new deposits or renew existing deposits in such branches if they do not meet certain conditions.
The RBI said restrictions on investments in unlisted shares applicable to NBFCs will also apply to HFCs, adding that deposit-taking HFCs will be required to fix separate board-approved internal limits within the direct investment limit, for investments in unlisted shares of another company which is not a subsidiary or a company in the same group as the HFC.
The RBI also said non-banking financial companies (NBFCs) will pay 100% of the deposit amount within the first three months of accepting the fund, if the depositor requests a withdrawal citing an emergency.
In its review of regulations governing NBFCs, the central bank said no interest will be payable on such premature withdrawals, adding that these changes will come into effect from January 1, 2025.
The definition of “critical illness” set by insurance regulator IRDAI will guide whether an application qualifies under that category, the central bank said.
“…in case of serious illness, one hundred percent of the principal amount of the deposit may be paid in advance to individual depositors, at their request, within three months from the date of acceptance of such deposits, without interest,” the central bank said.
It was specified that expenses of an emergent nature include a medical emergency or expenses due to natural calamities or a disaster notified by the government, it said.
If the money is not sought for an emergency and early withdrawal is sought within three months, NBFCs can pay out up to 50% of the deposit without paying any interest.
However, not more than 50% of the principal amount of the deposit or ₹5 lakh, whichever is less, can be paid in advance, it added.
The RBI has also asked NBFCs to inform depositors about maturity 14 days in advance, while current regulations stipulate two months.
The RBI has asked NBFCs to ensure that the audit committee ensures that an audit of the information system is conducted as per the stipulations.
The central bank said it has reviewed regulations applicable to housing finance companies and NBFCs with a view to harmonizing rules for both.
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.