Rating To Be Mandatory For Hfcs Soon

The National Housing Bank (NHB) is planning to include credit rating requirements as part of the National Housing Bank directions, 1989.

The move becomes important in the context of the recent freedom granted to housing finance companies to fix their own deposit rates.

The relaxation on deposit rates comes with a rider of the HFC, fulfilling the credit rating requirements laid down by the NHB.

The other prudential norms of the HFC include, following income recognition and accounting standards norms and capital adequacy requirements.

Sources at NHB stated that companies try and evade rating requirements by stating that the rating is only part of the prudential norms laid down by the NHB, as such prudential norms are not statutory in nature.

"This has prompted us to include credit rating requirements as part of the directions laid down by the bank.

These directions are statutory in nature and HFCs will be forced to follow the rating requirements, once they are made statutory," sources at NHB said.

According to current rating requirements of the housing finance companies, all HFCs are required to obtain credit rating of its deposit instruments by one of the three credit rating agencies, the Credit Rating Information Services of India Limited (CRISIL), Investment Information and Credit Rating Agency of India Ltd (ICRA) and Credit Analysis and Research Ltd (CARE).

The prudential norms specify that HFCs should have got rated by September 1, 1995.

A minimum rating of either FA- or MA- or CARE BBB respectively is necessary for HFCs to accept fresh deposits.

A fresh rating has to be obtained atleast once every year.

In case a HFC fails to get the minimum credit rating, it will not be allowed to accept fresh deposits or to renew matured deposits till the total deposits are brought down to 40 per cent of its net owned funds.