Debt investments in HFCs be exempted from sectoral limits
Apex industry body ASSOCHAM has sought respite for housing finance companies (HFCs) from markets regulator SEBI with a request to treat HFCs at par with private banks and public financial institutions (PFIs).Debt investments in HFCs should be exempted from sectoral limits and securities issued under AAA rating for long-term instruments and A1+ for short-term instruments by HFCs should be treated on par with AAA rated securities and certificate of deposits issued by private banks, urged ASSOCHAM in a communication addressed to the Securities Exchange Board of India (SEBI) chairman, Mr U.K. Sinha.
The ASSOCHAM has further suggested the capital markets regulator that mutual fund investments in AAA rated pass through certificates (PTCs) backed by mortgages should not be considered as exposure to the HFCs as these are serviced and secured by underlying pools of granular secured housing loans.
As specialist housing loan and mortgage financiers, HFCs are an important source of efficient finance for the housing sector with almost 40 per cent share in housing loan market share, said Mr Sunil Kanoria, president, ASSOCHAM.
Besides, HFC loan books consist of granular housing loans to individuals backed by houses financed and thus represent one of the safest types of loans, evidently as the non-performing asset (NPA) levels of HFCs are far lower than public and private banks, said Mr Kanoria.
Considering the government's thrust on finance sector together with crucial role of HFCs, it is surprising to note the SEBI's recent guidelines vis-vis reducing the additional exposure limit provided to HFCs.
As such ASSOCHAM has urged the SEBI to consider the socio-economic importance of the housing sector and its role in furthering the union government's mission of Housing for All by 2022.
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