Revised norms for deposit-taking housing finance companies (HFCs)

Current Context: The Reserve Bank of India (RBI) has revised the norms for deposit-taking housing finance companies (HFCs), and these changes came into effect on January 1, 2025.

• Here are the important highlights:
• Increased Liquid Asset Requirements: HFCs must maintain liquid assets equivalent to 14% of their outstanding deposits starting January 1, 2025, increasing to 15% by July 1, 2025.
• Unencumbered Approved Securities: At least 8% of public deposits must be held in unencumbered approved securities, rising to 10% by July 1, 2025.
• Harmonization with NBFCs: The new norms align HFCs' regulations with non-banking financial companies (NBFCs), including reducing the ceiling for public deposits to 1.5 times of net owned funds (from 3.0 times earlier) and limiting the maximum tenure of deposits to 60 months (from 120 months earlier).
• Financial Stability: These changes aim to enhance financial stability, safeguard depositors' interests, and ensure HFCs can handle liquidity pressures effectively.

Question:

1 What is the new liquid asset requirement for deposit-taking housing finance companies (HFCs) effective from January 1, 2025?

• A) 10%
• B) 12%
• C) 15%
• D) 14%

Answer: D) As per the revised norms by the RBI, deposit-taking HFCs are required to maintain liquid assets equivalent to 14% of their outstanding deposits from January 1, 2025. This will increase to 15% by July 1, 2025.