Executive Summary:
This notification from the National Housing Bank, dated 25th May 2019, outlines the maintenance of a minimum percentage of liquid assets for housing finance companies. It invokes powers under the National Housing Bank Act, 1987, and supersedes an earlier notification from 2001. The notification specifies investment and maintenance requirements related to public deposits.
Key Points / Main Content:
Liquid Asset Requirements:
* Housing finance companies accepting public deposits must invest in unencumbered approved securities.
* The investment amount must be at least 6.5% of public deposits outstanding at the close of business on the last working day of the second preceding quarter.
* Companies must maintain funds in a scheduled bank account, term deposits, certificates of deposit, deposits with the National Housing Bank, or bonds issued by the National Housing Bank.
* The total of these funds plus the investment mentioned above must be at least 13% of public deposits outstanding at the close of business on the last working day of the second preceding quarter.
General Provisions:
* All other provisions of Section 29B of the National Housing Bank Act, 1987, apply as if "public deposit" is equivalent to "deposit."
* Public deposit is defined as per paragraph 21 y of the Housing Finance Companies NHB Directions, 2010, as amended.
Impact Analysis:
Housing Finance Companies:
* Impact: Must comply with new liquid asset maintenance requirements which may involve restructuring their investment portfolios and deposit management.
* Action Required: Re-evaluate current asset allocation to meet the stipulated minimum percentage for investments in approved securities and liquid assets, and ensure compliance with reporting requirements.
Key Entities Referenced
National Housing Bank: An Indian financial institution that regulates housing finance companies.
National Housing Bank Act, 1987: An act of the Indian Parliament that established the National Housing Bank.
Section 35B: Section of the National Housing Bank Act, 1987, related to powers conferred to the National Housing Bank.
Section 29B: Section of the National Housing Bank Act, 1987, related to maintenance of liquid assets by housing finance companies.
Housing Finance Companies NHB Directions, 2010: A set of guidelines issued by the National Housing Bank for Housing Finance Companies.
New Delhi: The location of the National Housing Bank and the place of publication for the notification.
Dakshita Das: Managing Director and Chief Executive Officer of the National Housing Bank.
India: The country in which housing finance companies are required to invest in unencumbered approved securities.
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[िव(cid:3)ापन-III/4/असा./69/19]
NATIONAL HOUSING BANK
New Delhi, the 25th May, 2019
NOTIFICATION
Maintenance of a minimum percentage of liquid assets
No.NHB.HFC.LA-2/MD&CEO/2019.—In exercise of the powers conferred under
Section 35B read with sub-sections (1) and (2) of Section 29B of the National Housing Bank
Act, 1987 (53 of 1987) and in supersession of the earlier Notification No. NHB.HFC.LA-
1/CMD-2001 dated 27th September 2001, the National Housing Bank being satisfied that it
is necessary so to do, hereby declares that the provisions of sub-sections (1) and (2) of
Section 29B of the said Act shall not apply to housing finance companies, subject however
that—
(A) Every housing finance company accepting public deposits shall
(1) invest and continue to invest in India in unencumbered approved securities, valued at a
price not exceeding the current market price of such securities, an amount which, at the
close of business on any day, shall not be less than six and a half per cent of the public
deposits outstanding at the close of business on the last working day of the second
preceding quarter.
(2) maintain in India in an account with a scheduled bank in term deposits or certificate of
deposits (free of charge or lien) or in deposits with the National Housing Bank or by way of
subscription to the bonds issued by the National Housing Bank, or partly in such an
account or in such deposit or partly by way of such subscription, a sum which, at the close
of business on any day, together with the investment made under clause (1) shall not be
less than thirteen per cent of the public deposits outstanding at the close of business on the
last working day of the second preceding quarter¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 3
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(B) All other provisions of Section 29B shall be applicable to the above
requirement as if the expression “public deposit” is the same as the expression “deposit” as
contemplated under the said provision.
Explanation:
“Public deposit” shall have the same meaning as defined under paragraph 2(1) (y) of the
Housing Finance Companies (NHB) Directions, 2010, as amended from time to time.
DAKSHITA DAS, Managing Director & Chief Executive Officer
[Advt.-III/4/Exty./69/19]
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