National Housing Bank (NHB) should hand out ‘deposit-taking’ licences to strong listed Housing Finance Companies (HFCs) with a proven track record, an industry body has suggested.

Allowing credible HFCs with a strong balance sheet to accept retail deposits will support Prime Minister Narendra Modi’s mission of ‘Housing for All by 2022’, Assocham said in a letter to NHB Managing Director and Chief Executive Officer, Dakshita Das.

This will also provide an alternative funding avenue for HFCs that were till date forced to rely on bank borrowings and capital markets for their funding requirements.

There is also a need for a level-playing field for HFCs in the context of ‘deposit-taking’ licence, the chamber has said, highlighting that only 18 of the 96 HFCs operative in India hold ‘deposit-taking’ licences.

NHB is currently the regulator for HFCs in the country. It may be recalled that NHB had, several years back, taken a policy decision to discontinue the practice of allowing HFCs to access public deposits.

At the same time, it then allowed those with existing licences to continue accessing public deposits. The late entrants are feeling the pinch of this decision, as it seemingly placed them at a disadvantage.

Assocham has also now recommended the introduction of a flagship home loan-linked deposit scheme, ‘New India Home Loan Deposit Scheme’. Any such move will boost demand for affordable housing.

Eligibility criteria

Assocham has said that deposit-taking licence may be given to HFCs with a minimum book size of ₹15,000 crore, and only to those who have been operating in the industry for a minimum of 10 years.

Also, there should be no accumulated losses, and there should be a proven track record of profitability for consecutive number of years as the regulators may deem fit.

NHB may also look at credit rating as a metric to determine eligibility to issue fresh deposit-taking licence, the chamber has said.

Ravinder Sudhalkar, Co-Chairman of Assocham-National Council on Affordable Housing, said: “Allowing HFCs to accept deposits will result in a level-playing field across the board. Importantly, HFCs will be able to access an alternative source of funding and bring down the dependency on bank funding that today accounts for upwards of one-third (30 to 40 per cent) of their total funding requirement. It will also ensure stability in lending rates which will help consumers.”

RV Verma, former chairman and managing director of NHB, said: “If at all HFCs are allowed to take public deposits, then it should be for a minimum period of 24 months in the interest of better asset- liability matching.”

While in the current environment there may be a case for allowing HFCs to accept public deposits, this issue has to be seen from a longer term monetary policy perspective of both systemic stability and deposit protection, Verma told BusinessLine .

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