RBI’s stricter HFCs norms to have minimal impact on PNB Hsg, LIC Hsg, Can Fin Homes, say analysts

The central bank proposes to reduce the ceiling for public deposits held by HFCs to 1.5x from 3x of net owned funds

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PNB Housing, LIC Housing Finance and Can Fin Homes will see limited to no impact of Reserve Bank of India’s proposed stricter norms for deposit-taking housing finance companies (HFCs), analysts said.

The central bank on January 15 proposed to reduce the ceiling for public deposits held by HFCs to 1.5x from 3x of net owned funds.

Earlier HFCs could have deposits up to Rs 300 for every Rs 100 of their net owned funds, which includes shares and reserves. The ceiling has been brought down to Rs 150, Bunty Chawla, AVP-BFSI at IDBI Capital Markets & Securities said.

“The new norm is in-line with RBI’s norms for NBFCs. These norms ensure that if any credit quality issues ever rise, they can be addressed efficiently. This does not impact credit growth,” Chawla said.

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As per Morgan Stanley’s calculation, deposits/equity stood at 1.2x, 0.4x and 0.1x for PNB Housing, LIC Housing and Can Fin Homes, respectively. All three are well within RBI’s regulations.

Other changes

The RBI has also said that deposit-taking HFCs have to maintain 15 percent of deposits in liquid assets from the 13 percent requirement currently. This will be done in a phased manner — 14 percent by September 2024 and 15 percent by March 2025.

Maturity of deposits raised will be capped at 60 months from 120 months now.

HFCs must obtain investment grade credit rating at least once a year. They should also fix board approved policy on max limit for investment in unquoted shares of another company which is not subsidiary, the RBI has said.

Also Read: RBI proposes to further harmonise regulations of HFCs and NBFCs

“Lower rung housing finance companies might be affected due to this norm. Capital might be a problem for them so investor should focus on the better-placed names,” Mayuresh Joshi of William O’Neil said.

At 10 am, PNB Housing Finance was trading 2.5 percent higher at Rs 817, LIC Housing Finance was up 0.36 percent at Rs 580.20 and Can Fin Homes 0.4 percent at Rs 766 on the National Stock Exchange (NSE).

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