Parliament Clears Nhb Act Changes

Decks have been cleared for developing a secondary mortgage market in housing through securitisation, with the Lok Sabha yesterday passing the Bill to amend the National Housing Bank Act, 1987. The Bill was cleared by the Rajya Sabha on May 10.

The NHB has been authorised to deal in housing loans through purchase and sale. The bank can now create trusts and transfer loans to the trusts and also act as trustees for the holders of the securities for undertaking securitisation of mortgages. The overdue of loans can be recovered as arrears of land revenue.

Under the Act, the bank has been empowered to regulate the deposit acceptance operations of financial institutions to protect the investing public.

 

From now on, housing finance companies with net owned funds of over Rs 25 lakh will require registration for starting business. They will also have to invest a certain portion of their assets in specified securities.

Besides, they will have to create and maintain a reserve. Penal provisions are also proposed for the violation of these provisions.

What's more, the government will appoint special officers to expedite the process of recovery by the housing finance firms and banks. The recovery officers can also entertain the application of the approved institution, decide on issues involved and enforce the securities to realise the loans.

It is also proposed that an appellate tribunal on the lines of the debt recovery appellate tribunal will be established under the Recovery of Debt Due to Banks and Financial Institutions Act of 1993. The tribunal will hear appeals against the recovery officers. The passage of the Bill is expected to help housing finance companies to recover their dues in a speedy manner.

The amendment also authorises the government to increase NHB's authorised and paid-up capital to Rs 2,000 crore from the existing Rs 350 crore. National Housing Bank will also be able to offer its holding to institutions such that the Reserve Bank of India, the government and other institutions that are government-owned or controlled will not have less than 51 per cent of NHB's issued capital between them.

Homing In

NHB can now Finance firms will have to

* Del in loans through * Get registration for starting

purchase and sale business

* Create trusts and transfer * Invest a certain portion of

loans to them their assets in specified

securities.

* Act as a trustee for * Create and maintain a

security holders reserve

* Recover dues * Face punishment for

* Regulate FIs deposit flouting NHB norms