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RBI to regulate housing finance firms replacing National Housing Bank

RBI to regulate housing finance firms replacing National Housing Bank

India announced measures to strengthen oversight of the country’s shadow banks and improve their access to funding by providing guarantees for purchases of their assets.

The Reserve Bank of India (RBI) will now be the regulator of housing finance firms, replacing the National Housing Bank, Finance Minister Nirmala Sitharaman said during her budget speech on July 5, 2019.

The RBI`s oversight of HFCs will be a step towards the Indian authorities getting a firmer grip on the risky shadow banking sector that will help to contain any systemic problems.

The National Housing Board was controlled by the RBI before the government took over the housing finance regulator on April 29. Shifting the regulatory powers to the RBI will, however, take place later in the year as it will require a change to the RBI Act, 1934.


During multiple asset quality reviews of banks, the RBI revealed a plethora of areas where lenders were under reporting their bad loans. It initially led to financial penalties for some lenders and eventually fed into decisions to impose tougher restrictions on their loan books while their bad debts remained high.

The housing finance companies, which are part of the broader shadow banking sector known as non-banking finance companies (NBFCs), are currently regulated by the National Housing Board, and the central bank has no direct authority over them. The other NBFCs are very loosely regulated, with various regulators including the RBI having some role but no one being fully accountable.

A series of debt defaults last year by major infrastructure financing group, Infrastructure Leasing and Financial Services (IL&FS), showed that much of the sector was highly leveraged.

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