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| HFCs get more leeway in foreign currency loans | |
| BS Reporter / Mumbai November 18, 2008, 0:57 IST | |
The Reserve Bank of India (RBI) has permitted housing finance companies (HFCs) to raise up to $10 million through short-term foreign currency loans, like non-bank finance companies (NBFCs).
Last week, RBI had said that it would allow HFCs registered with National Housing Bank (NHB) to raise resources to refinance short-term liabilities on a temporary basis.
The maximum tenure of these loans should be three years and the all-in-cost interest ceiling has been capped at 200 basis points above six-month Libor. The resources, which can be raised from institutions and foreign equity holders with 25 per cent or more stakes, will have to be swapped with rupees.
The central bank also said the foreign currency loan facility would be applicable to those HFCs, which comply with prudential norms related to capital adequacy and other prudential norms laid down by NHB.
RBI also relaxed the standard asset provisioning requirements of banks to 0.40 per cent from 2 per cent, except in case of direct advances to agriculture and SME sector, where the provisioning requirement is 0.25 per cent. The measures are intended to encourage the banks to increase the flow of credit to these companies.
Of late, HFCs were finding it difficult to access funds, especially from banks, and have sought a series of measures from RBI, including rollover of debt by banks. In addition, they want banks to disburse sanctioned amounts and access to external commercial borrowings. Over the past few weeks, these finance companies have held a series of meetings with RBI.
“It’s a welcome step. We have already started to look for avenues by which we would be able to access the window,” LIC Housing Finance Director and CEO RR Nair said.
However, he also added that the companies will have to analyse whether the cost of borrowing this channel would be cheaper compared to domestic sources.
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