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The government-owned National Housing Bank (NHB) has put together a ₹10,000-crore special refinance facility (SRF) of up to one-year tenor for housing finance companies (HFCs) to partially mitigate their liquidity risk and improve liquidity in the overall housing finance system.
Though primary lending institutions (PLIs) such as regional rural banks, small finance banks and scheduled commercial banks too are eligible for refinance under SRF, the eligibility criteria that have been prescribed suggest that it is meant exclusively for HFCs.
One of the eligibility clauses for tapping SRF is that the ratio of individual housing loans to total assets should be a minimum of 51 per cent. Going by this, only HFCs will qualify. Currently, banks are flush with liquidity and may not require refinance.
NHB has stipulated two other conditions for accessing the short-term SRF by HFCs and other eligible PLIs — their net non-performing assets cannot exceed 7.50 per cent; and they should have extended moratorium to their customers and this should have adversely impacted at least 15 per cent of their cash flows during the moratorium period (March 1 to May 31, 2020).
Quantum of refinance
The quantum of refinance under the facility has been set at 20 per cent of an HFC/PLI’s net owned funds or ₹750 crore, whichever is lower. The eligible amount will be based on the assessment of the impact of the moratorium on the cash flows of the HFC/PLI during the period of moratorium.
NHB will charge HFCs/PLIs interest rate based on their internal credit rating. Interest has to be paid on quarterly basis along with payment of interest on other refinance schemes.
HFCs/PLIs are required to utilise the funds drawn under SRF to disburse individual housing loans falling under the category of “priority sector”, as defined by the Reserve Bank of India (RBI), over a period of one year.
Housing loans to individuals up to ₹35 lakh in metropolitan centres and ₹25 lakh in other centres, provided the overall cost of the dwelling unit in the metropolitan centres and at other centres does not exceed ₹45 lakh and ₹30 lakh, respectively, are eligible for classification under priority sector lending, according to the RBI.
HFCs/PLIs have to disburse minimum 25 per cent of the funds drawn under SRF as individual housing loans in three months; 50 per cent in six months; 75 per cent in nine months; and 100 per cent in a year. They have to submit utilisation certificate every quarter.
In case the above ratio is not reached, additional interest rate of 2 per cent will be charged till the shortfall is bridged/achieved.
At the time of draw-down of refinance, PLIs will have to provide flagged loan list (of only standard accounts up to 100 per cent of the facility) and also an undertaking that no charge will be created on these loans.
In the wake of the Covid-19 pandemic, the RBI has provided a Special Liquidity Facility of ₹10,000 crore to NHB to enable it to infuse liquidity into the housing sector through HFCs as also other PLIs at more affordable rates and to meet the credit needs of the sector.
NHB carries out supervision of HFCs and provides refinance to PLIs, including HFCs.
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