Keep more money in your purse, NHB tells housing finance companies

The housing sector regulator, National Housing Bank (NHB), could stay with its current governing structure for some more time as the government seeks to tighten the supervision of the sector. Roiled by the experience of IL&FS and other leading non-banking financial companies (NBFCs), the government wants to keep a close eye on the housing sector to check for any slippage.

The NHB has asked housing finance companies to maintain more money in their purse. It also decided to scrap a plan floated in 2017 to extend the 90-day NPA classification window for the sector.

The institution has been taken over by the finance ministry from the Reserve Bank of India (RBI) with effect from March 19. 

Currently, it functions with managing director and chief executive officer (CEO), Dakshita Das and one executive director, Ashwani Kumar Tripathi at the top. 

While Tripathi has been a former RBI officer in the Monetary Policy Department, Das is an Additional Secretary in the Department of Financial Services in the finance ministry. 

The NHB role is an additional charge for Das. 

The NHB had advertised for another ED in February this year.

“We have begun to share detailed data on the financial condition of the housing companies with other regulators,” said a source in NHB. 

In 2018-19, it issued the largest number of penalties — from 16 to 99 housing finance companies. It was eight the year before and only one in 2016-17. 

While the NHB had issued 14 penalties in 2014-15, the ticket sizes were as low as Rs 1,000 (rupees one thousand) and none were publicly acknowledged by the companies affected.

Those rapped in 2018-19 include Dewan Housing Finance and Indiabulls Housing Finance from the private sector besides LIC Housing Finance and GIC Housing Finance, among others. These companies have been instructed to “prominently display on their website (any) penalty levied by NHB” and also communicate the same to the stock exchanges. 

The largest penalty of Rs 3,415,000 was issued on GIC Housing Finance in January this year.

Das has written to both the RBI and the finance ministry to include the housing sector in its risk assessment of the NBFC sector. 

The NHB could soon become a member of the Financial Stability and Development Council, the coordination committee of the sector regulators.

To drive the housing finance sector to financial best practices, the NHB has issued a draft paper suggesting a progressive increase in the capital adequacy ratio of the companies to 14 per cent from the present 12 per cent. 

It has also pitched for lowering the leverage ratio of these firms through a graded reduction in their overall borrowing limit to 14 times their net owned funds from the present 16 per cent.

Within the housing finance sector, the NHB has a dual role. It provides refinance support to these companies and also acts as the regulator. 

In FY18 it provided refinance of Rs 24,921 crore. The outstanding refinance of NHB was Rs 58,725 crore as on June 30, 2018, according to its publication “Trends and Progress of Housing in India”. As of now it is the regulatory role of NHB that the finance ministry is keen to push ahead with.

NHB was set up under the RBI in 1987. In a notification issued on April 29, the finance ministry confirmed that it has paid Rs 1,450 crore to RBI towards the subscribed capital of NHB by the RBI. It now “stands transferred to, and vested in the central government”, the notification reads.

Within the housing finance sector, the NHB has a dual role