The regulator has conveyed that intermediaries have to be employed by lenders, not borrowers.
With financial services firm Money Matters accused of being involved in the bribe-for-loan scam, sector regulator National Housing Bank (NHB) has asked housing finance companies (HFCs) not to encourage intermediaries and appraise companies and projects directly. NHB is also in the process of firming up guidelines for intermediaries.
Money Matters is accused of facilitating corporate loans by bribing officials.
“In a special meeting with HFCs, we advised them to discourage proposals through intermediaries and deal directly with the borrowers. We are in the process of firming up guidelines, including for intermediaries,” said NHB Chairman R V Verma.
In the meeting, NHB asked the chief executives of HFCs to reinforce guidelines, due diligence and corporate governance.
A source present at the meeting said the regulator looked into the individual portfolios of HFCs. “NHB was quite content with the exposure, as it was well within the prescribed guidelines. It is working on developing guidelines for collecting information from HFCs. This will help it monitor the portfolios better.”
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NHB will look into the types of intermediaries employed by the lenders. It has also expressed concerns over intermediaries being employed by borrowers.
“The regulator conveyed that intermediaries have to be employed by the lenders, not borrowers,” the source added.
NHB guidelines say the ultimate responsibility for knowing the customer lies with HFCs. Also, in case of large accounts, HFCs are supposed to periodically review the risk categorisation and enhance due diligence measures.
NHB has capped the loan-to-value (LTV) ratio for loans above Rs 20 lakh at 80 per cent. For those below Rs 20 lakh, companies can finance up to 90 per cent of the loan value. This follows a similar measure by the Reserve Bank of India for banks.
NHB has also prescribed a general provisioning of 0.4 per cent of outstanding loans. In case of standard assets of teaser loans, it has mandated a two per cent provision. However, the provisioning can be reset a year after the rates shift to the floating system if the accounts remain standard.
As a result, all HFCs will have to put aside around Rs 700 crore — Rs 624 crore on teaser loans and Rs 80 crore on additional loans to individuals. Large players like HDFC and LICHF are likely to absorb the most of it.
According to Edelweiss, with respect to credit cost and competitive advantage, the impact on HFCs would be relatively higher compared to banks.
For HDFC, 27 per cent of its individual loan book is under the dual-rate scheme. Similarly, loans given at an LTV ratio of below 80 lakh are less than three per cent in case of LIC Housing Finance.