RBI guidelines on ECBs for NHB, HFCs likely soon

MUMBAI: The Reserve Bank is likely to come out soon with guidelines pertaining to external commercial borrowings (ECBs) for National Housing Bank ( NHB) and housing finance companies for affordable home loans.

"The government has already allowed NHB and some HFCs (to raise money through the ECB route) for affordable housing. The guidelines are being finalised by the RBI and they are going to notify them soon," NHB Chairman and Managing Director R V Verma told reporters on the sidelines of a summit here.

He also said the criteria and parameters for the borrowing by NHB and HFCs for channelising the money to this sector would be included in the guidelines.

In August, the government had allowed the NHB and HFCs to raise money from overseas through the ECB route for affordable housing projects.

On the recent decision of market regulator Sebi to allow mutual funds to have extra 10 per cent exposure to HFCs, Verma said it would diversify the sources of funding for housing finance companies, which would have a positive impact on loan pricing.

"From the point of view of exposure, HFCs have a much wider avenue of sourcing funds and it will also improve liquidity. It will also have a tempering effect on their cost of funds, which will eventually be transmitted to borrowers," Verma said.

Referring to total refinancing in this fiscal (NHB follows July-June cycle of accounting), he said it plans to refinance Rs 17,000 crore in the current financial year.

Meanwhile, Sebi Chairman U K sinha released a report of a working group constituted by NHB on covered bonds, an innovative capital market instrument aimed at mobilising funds for hoursing finance companies.