Stories
National Housing Bank Steps Up Scrutiny of HFCs Over Compliance Gaps
- •The National Housing Bank has intensified its scrutiny of small and mid-sized housing finance companies following concerns over compliance gaps.
- •Authorities are conducting forensic audits and tighter checks focusing on loan classification, property valuations, and refinance eligibility.
- •Key concerns include the misclassification of loans against property as housing finance to wrongly meet the principal business criteria threshold.
- •Lenders face strict examinations regarding loan-to-value ratios and property valuations, especially for loan pools submitted for refinance.
- •The supervisory framework involves both on-site inspections and off-site monitoring to ensure adherence to capital adequacy and internal controls.
Key Questions Answered
The National Housing Bank has intensified its scrutiny of housing finance companies due to concerns over compliance gaps at some smaller and mid-sized lenders. These gaps include issues with loan classification, property valuations, internal controls, and refinance eligibility.
Under NHB norms, a lender qualifies as a housing finance company only if at least 60 percent of its loan book comprises housing loans or mortgages. Lenders cannot interchangeably classify mortgage and non-mortgage loans, such as loans against property, to meet this 60 percent threshold and avail refinancing.
The RBI's Housing Finance Companies Directions, 2025, require lenders to obtain at least two valuation reports, including one from an independent valuer, for loans between Rs 50 lakh and Rs 75 lakh. For loans of Rs 75 lakh or more, two independent valuation reports are needed, with the lower valuation used to determine the loan amount.
