National Housing Bank (NHB) has been established under the National Housing Bank Act, 1987 to o...
In India, Housing Finance Companies (HFCs) are regulated by the National Housing Bank (NHB), while bank lending to housing is governed by the Reserve Bank of India (RBI). These housing finance companies need to adhere list of compliances for their operations. In this blog, we will discuss the compliance of housing finance companies in detail.
For Housing Finance Companies, there are various compliances that need to be followed timely. We have divided these compliances into two categories:
Now let’s discuss both in detail;
Following are the pre-incorporation compliances:
|1.||The first step is to make an application to the national housing bank for the setting up of a housing finance company. The application must include the points mentioned below-
|2.||Before the receipt of COR (Certificate of registration), there has to be guidance during NHB audit, inspection, and other important processes.|
|3.||There has to be advisory for the appropriate structure of the board|
Once the housing finance company is incorporated, here are the following compliances that need to be followed:
|1.||You need to recommend, validate and develop/re-engineer the loan process|
|2.||Recommendation and development or validation of loan policies. In this, you need to include the appraisal techniques and tools.|
|3.||Development of a product|
|4.||You need to develop a proper IT infrastructure|
|5.||There has to be the management of credit risk|
|6.||There has to be a scoring model in a housing finance company|
|7.||You have to recruit the CEO /HoDs for a housing finance company. It needs the participation of every valuable member of the company|
|8.||There is a need to have a proper organizational structure and HR policies|
|11.||MIS (Management Information System) Format|
|1.||Every HFC have to file Annual Returns, half yearly return on prudential norms, quarterly returns on maintenance of liquid assets|
|2.||You need to submit the Auditor’s certificate on annual basis certifying the capability of the HFC to repay deposits|
|3.||Copy of Financial statements/ Annual report|
|4.||Returns on changes pertaining to the address of the registered office of the HFC, its director etc|
|5.||Filing a copy of the advertisement soliciting public deposits or statement in lieu thereof|
Additionally, the National Housing Bank (NHB) has directed Housing Finance Companies (HFC) to comply with IND-AS provisions. IND-AS is basically a set of accounting norms developed by Indian authorities, which coincides with the International Financial Reporting Standards (IFRS).
In accordance with the directions issued by the National Housing Bank (NHB), Housing Finance Companies (HFC) has to comply with the provisions of IND-AS= as notified by the Ministry of corporate affairs.
If the HFC fails to comply with the regulations, in that case, NHB can take the following actions-
|1.||NHB can issue specific directions to prohibit the acceptance of deposits and alienation of assets|
|2.||It may also cancel your certificate of certification|
|3.||HFCs may be asked to file the application to end the life of the company|
|4.||NHB can impose financial penalties on HFC and their principal officers|
|5.||NHBs will file the complaints before the magistrate, to state the reason for imposing the penalty|
As we have already discussed in the beginning, Housing Finance Companies are regulated by the National Housing Bank, so let’s discuss the role National Housing Bank in connection with the Housing Finance Companies in India.
You have to follow certain guidelines to participate in the equity of housing finance companies.
Following are the Safeguard Provisions for depositors under the NHB Act, 1987 and Housing Finance Companies (NHB) directions, 2001
Housing Finance Company is a huge entity in itself. Operating a Housing Finance Company is a task, so to make sure that these companies work hassle-free. Enterslice can make the compliance process easy & uncomplicated for you. For more information, please contact.