HFCs should be regulated by RBI: SBI chairman

Currently, RBI regulates home loans provided by commercial banks, while housing finance companies are regulated by National Housing Bank

Housing finance companies (HFC) should also be brought under purview of the Reserve Bank of India (RBI), said State Bank of India (SBI) chairman Pratip Chaudhuri.

The chairman of the biggest lender of the country said, "I see no justification for having a separate regulator for home loans. Perhaps the objective of the regulations is better served, with RBI itself becoming the sole regulator for all loans including home loans. In no other country do we have different regulators for different verticals such as industrial loans, home loans and vehicle loans. Why should it be so?" He was in the city to attend the 5th ICC Banking Summit.

Currently, RBI regulates the home loans provided by all commercial banks operating in India. While, housing finance companies are regulated by National Housing Banks.

Chaudhuri pointed out that banks accounted for more than two-third of the total home loan disbursed in the country, and a "single" regulator would help in removing the regulatory arbitrage that exists between banks and HFCs.

 Meanwhile, Chaudhuri also said that the minimum tenor for bank deposits should be brought down to 3 days from 7 days to make it more flexible for the depositors.

"This (minimum tenor of 7 days) was right in a situation when there were no daily investment instruments available," he said.

 "So we have made a request to the RBI to reduce the minimum tenor from seven days to three days. The liquidity risk is not very different from a seven-day deposit and three day deposit, but the question is why make the banks handicapped," he added.
Chaudhuri once again stressed on the need of paying interest on the money locked in central bank as CRR.  It is the minimum percentage of cash deposits that banks must keep with the central bank.  

. “A CRR cut would really help the economy but if that is not possible at present, RBI should pay around six per cent interest on the money locked in as CRR. SBI alone locks in around Rs 60,000 crore with RBI,” he added

The SBI chairman later added that he was expecting the March quarter NPAs (non performing assets) to be better than the December quarter. He hinted that bank would be pumping more core capital in the domestic business expansion than overseas and instead raise tier II capital there after margins have come under pressure.

"Overseas business margins are under pressure. My sense is domestic RoE (return of equity) is significantly higher than overseas biz. Therefore, it may not be very useful to put more tier I capital, but it is more productive and useful and efficient to raise tier II bonds in overseas," he added.

Currently, the state-run bank has 185 branches overseas.

Chaudhuri on deposit taking schemes:

The RBI or Sebi should do a mass media campaign in the lines of 'Jago Grahak Jago' which will make people aware about fraudulent schemes. “The campaign should inform that when one is depositing the money whether it is insured by Deposit Insurance Corporation. Banks should be allowed to put up a display inside branches saying the deposits are DIC insured and if even after these measures someone chooses to deposit their money in other avenues then a that is their choice,” said Chaudhuri.