Budget 2019: NHB to retain power to inspect, penalise housing finance firms

The National Housing Bank (NHB) will continue to inspect and penalise housing finance companies (HFCs), even as its regulatory powers will be shifted to the Reserve Bank of India (RBI), following the Union Budget announcement.
 
“The NHB will be the supervisor of HFCs and the RBI will take up the regulatory role. This will be akin to what the National Bank for Agriculture and Rural Development (Nabard) is to the regional rural banks, wherein the RBI continues to be their regulator,” a senior NHB executive said, requesting anonymity.
 
A senior finance ministry official said the RBI may direct the NHB to inspect the books of housing finance institutions and submit a report to it. The NHB may also independently inspect the books of the HFCs, according to provisions of the Finance Bill, 2019. Going ahead, the government may also allow the NHB to offer a higher refinance window to HFCs, the official said.
 
Certificate of registration, prudential norms and guidelines will be issued by the RBI, after the Finance Bill 2019 is passed by both the Houses of Parliament. However, according to the Finance Bill, before issuing the certificate of registration, the RBI may ask NHB to conduct inspection of books of the applicant for HFC.
 
Even as regulatory powers will be shifted to the RBI, NHB can continue to impose fines on HFCs in case of lapses, according to the proposal.

 
The ownership of NHB was transferred from the RBI to the finance ministry in March 2019, which made it inevitable for the central bank to take up the regulatory role for HFCs — some of which have witnessed stress on account of asset-liability mismatch, the NHB executive said.
 
“The NHB, besides being the refinancer and lender, is also the regulator of the housing finance sector. This gives a somewhat conflicting and difficult mandate to NHB. I am proposing to return the regulation authority over the housing finance sector from NHB to the RBI. Necessary proposals have been placed in the Finance Bill,” Finance Minister Nirmala Sitharaman said, during the presentation of the Budget on Friday.
 
NHB will continue to do refinancing for HFCs, apart from promotional role for the government. The NHB is handling the Pradhan Mantri Awas Yojana — a programme aimed at giving housing facilities to all citizens by 2022. It will continue to come out with the official housing price index, along with an annual report on “trends and progress of housing in India”.
 
“The NHB will have the mandate to ensure growth in housing finance sector and develop the market. It will also try its hands on products such as reverse mortgage and may have a wider role in refinancing the HFCs,” the official said.
 
The RBI will also be given a wider mandate to regulate the non-banking financial companies (NBFCs) and will be empowered to restructure its board, go for merger or impose higher penalties for lapses.
 
The NHB, a principal agency to promote and provide financial support to 97 housing finance institutions had offered a refinance window of Rs 30,000 crore to HFCs in 2018-19. The NHB has its financial year between July and June.
 
Recently, the government appointed Sarada Kumar Hota as the new managing director of NHB. The NHB was without a full-time head since August last year when former MD Sriram Kalyanaraman was asked to step down, following alleged financial irregularities. Dakshdita Das, additional secretary in the finance ministry, was NHB’s interim chief till Hota’s appointment.