National Housing Bank proposes tighter norms for HFCs; caps borrowing

Experts believe this is also been seen as step to bring NBFCs and HFCs on the same page when it comes to CAR

The National Housing Bank has proposed to raise the capital adequacy ratio (CAR) for housing finance companies (HFCs) and cap their borrowing to 12 times their net worth, after the IL&FS fiasco exposed weaknesses in the profile of some HFCs. This is to be done in a phased manner, by March 31, 2022.

Currently, the HFCs have to maintain a minimum CAR, consisting of Tier I and Tier II capital, of not less than 12 per cent, while their borrowings are capped at 16 times their net worth.

The CAR will be increased to 13 per cent by March 31, 2020, to