The changes in the risk-weighted assets for undisbursed loans of Housing Finance Companies (HFCs) introduced by the Reserve Bank of India (RBI) on Monday will help improve the capital availability of these companies, according to experts.
“The changes in the risk-weighted assets for undisbursed amounts of housing loans or other loans would lead to some increase in reported Tier I capital (0.5 per cent – 2 per cent) for affordable housing finance companies (AHFCs), which have a significant share of the portfolio at 35 per cent risk weight. However, the impact is unlikely to be significant as the share of undisbursed loans is relatively low at 5-10 per cent, and these AHFCs are comfortably placed on the capital front,” said Manushree Saggar, Senior Vice President & Sector Head – Financial Sector Ratings, ICRA.
The RBI tweaked the risk weights for undisbursed loans by capping them at par with those of disbursed loans to address a potential anomaly in the computation of risk-weighted assets of these loans.
“Housing loans generally have a lower risk weight. Earlier, people were keeping it at 50 per cent risk weight for undisbursed amounts; now it will be aligned with the disbursed amount. It will have a minor impact on the capital, nothing major for the companies,” said an official from a housing finance company.
The regulator segregated risk weights for standard and stressed commercial real estate – residential buildings. The RBI said the risk weight for Commercial Real Estate – Residential Buildings classified as standard would continue to be 75 per cent. For exposures under this category that are not classified as standard, the risk weight shall be 100 per cent.
Meanwhile, according to experts, the separate circular introduced to bring harmonisation between NBFCs and HFCs is broadly in line with the draft circular, with most of the HFCs being compliant with it.
The RBI had reduced the ceiling on the quantum of public deposits that a deposit-taking HFC can hold from three times to 1.5 times of its net owned fund (NoF).
“The final guidelines regarding acceptance of public deposits by HFCs are largely in line with the draft norms issued in January 2024, except that entities have been given an additional time of six months (till January 2025 and July 2025) to comply with the requirements. In ICRA’s view, the changes are unlikely to materially impact deposit-accepting HFCs, given the adequate on-balance sheet liquidity available and their deposits being within the prescribed ceiling. However, there could be a higher cost of compliance,” Saggar said.
The banking regulator also directed the deposit-taking HFCs to maintain 15 per cent of their liquid assets against public deposits instead of the existing 13 per cent, which most companies are largely following.
“In terms of impact, most deposit-taking HFCs are already in compliance with the new norms. For a few, there may be marginal adjustments, either with managing on-book liquidity to adhere to the 15 per cent guideline or with reducing the ratio of public deposits to net owned funds, to maintain some headroom over the revised requirements,” said Subha Sri Narayanan, Director, CRISIL Ratings.
First Published: Aug 13 2024 | 7:40 PM IST
