NHB not to up capital requirement for HFCs
Mumbai: In good news for housing finance players, the sectoral regulator National Housing Bank (NHB) has said that it is not in favour of raising their minimum capital adequacy requirements, even though a high-powered committee has called for doing so for NBFCs.
"We are not proposing to increase the CAR (capital adequacy ratio) for housing finance companies (HFCs)," NHB Chairman and Managing Director R V Verma said here over the weekend.
A committee chaired by former Reserve Bank deputy governor Usha Thorat had recently recommended increasing the minimum capital requirements to 15 percent from the present 12 percent for non-banking finance companies (NBFCs).
In defence of the move not to increase the capital requirements, Verma said HFCs, which include players like HDFC, LIC Housing Finance, Dewan Housing, have a clearly defined business model which has low risks.
"In NBFCs, the portfolios can be widely varying and there can be very quick changes or dynamics in their balance sheets. That is not something which can happen to HFCs," he said.
"The housing loan actually are better defined; there aren't too many uncertainties, there aren't too many variables...The focus is on just the housing portfolio," Verma added.
Increasing the capital requirements will put a strain in the balance sheets of these companies and the additional cost will be transferred to borrowers, Verma said, stressing that the NHB constantly monitors the capital positions of the companies it regulates to look for any stress building up.
Verma further said the asset quality within the sector is very good, which does not require any additional capital allocations.
"The NPAs (non-performing assets) of HFCs are very well contained and the gross NPA is below 1 percent," he said. Moreover, all the companies have already taken a prudential stance and the average capital adequacy for the sector is 14-15 percent range, Verma stressed.
The regulator is also hopeful of fall in home loan rates in the current financial year.
"I hope that home loan rates will come down by 25-50 basis points in the current financial year as interest rate is likely to be lowered by the RBI," Verma said.
Home loan rates have shot up in the last one year on the back of hike in policy rates by the Reserve Bank.
The NHB, which follows a July-June financial year cycle, is likely to end FY12 with a disbursal of Rs 15,000 crore and is targeting it to go up to Rs 17,500 crore in the next financial year.