New NHB norms don't address funding and liquidity issues of HFCs: Moody's

The housing market regulator has proposed to raise capital adequacy ratio for HFCs from 12% to 15% by March 2022 and pare their total borrowings to 12 times their net worth from 16 times

New guidelines proposed by the National Housing Bank (NHB) to tighten capital adequacy and leveraging of housing finance companies (HFCs) do not address their funding and liquidity challenges after IL&FS group defaulted on its debt obligations, thus exposing the asset–liability mismatch of these companies, said Moody’s.

According to the global rating agency, “The new guidelines would be credit positive because they would limit HFCs' credit growth and cap their maximum exposure to the debt capital markets. However, the new guidelines do not address issues regarding the key credit risk of these companies, funding and liquidity”.

The housing market regulator has proposed to