HFCs to move regulator, govt to address rate hike and other industry issues

Also plan to take up issues such as impact of IRAC norms, status of Automatic Data Flow requirement, among others

The Association of Housing Finance Companies (AHFC), which has 33 registered housing finance companies spread across the country focused on affordable housing finance as its members, plans to take various concerns of the industry that affect its asset category and customer segment to regulatory bodies, and state and central governments.

The members of the association collectively manage affordable housing finance assets in excess of Rs 50,000 crore. In its meeting held recently, the association discussed the recent hike in interest rates and its impact on new business and on existing portfolios. “The meeting discussed the repo rate hike of 190 bps over the course of this year, the effect on borrowing rates, and the borrower's ability in this (affordable) segment to service higher EMIs. After the discussion, it was decided not to impose the additional burden on the borrower. It will be advisable to extend the tenure of the loan where possible,” AHFC said in a statement.

The meeting participants also discussed managing ALM (asset liability management) in an evolving liquidity scenario. The likely impact of IRAC (Income Recognition, Asset Classification, Provisioning and Other Related Matters) norms being implemented in this quarter with likely additional provision requirements and the resulting tax implication were considered.

“The additional provisions being mandated by the RBI to establish more prudent and robust business practices within the industry were welcomed by the members. Still, most felt the need to make representations to the Finance Ministry to allow higher provisions under income tax in line with the banks," it said.

This was necessary to ensure that the provisioned amounts aren't taxable, as opposed to regarding them as part of PBT (profit before tax) as is being done currently, the association explained in its statement.

The status of implementing the Automatic Data Flow requirement, which HFCs are to comply with by March 2023, was a hot topic among the members. The consensus was that the regulator needs to provide clarity about the process. The members also believed the implementation should reduce the number of reports to be submitted and queries to be answered, instead of giving rise to yet another process to be followed.

The members also discussed challenges faced in calculating principal business criteria norms, a key biggest concern that was earmarked to be addressed with the regulator. The funding of insurance for borrowers of the organisation and the need to address the classifications of the same were discussed.

The association has M Anandan, CMD of Aptus Value Housing Finance India, as its Chairman and Srinivas Acharya, ex-Managing Director of Sundaram Home Finance as advisor. Its committee members include M Balachandran, Chairman, Sashvita Home Finance, D S Tripathi, MD and CEO, Aadhar Housing Finance, Sachin Pillai, Managing Director, Hinduja Housing Finance, and Venkatesh Kannappan, Managing Director, AHAM Housing Finance.