Housing mortgage guarantee companies to be NBFCs
The Reserve Bank on Tuesday, said firms proposed to be set up to guarantee mortgages for housing loans will be treated as non-banking finance companies.
By PTI |
MUMBAI: The Reserve Bank on Tuesday, said firms proposed to be set up to guarantee mortgages for housing loans will be treated as non-banking finance companies.
Since a separate regulatory framework is being prescribed for mortgage guarantee companies, the central bank exempted them from certain existing provisions for NBFCs like the requirement of registration and maintenance of liquid assets.
In this fiscal's Budget, Finance Minister P Chidambaram had announced that regulations will be put in place to allow the creation of mortgage guarantee companies. These companies are expected to provide comfort to housing finance companies and banks by guaranteeing mortgages.
"Our people want housing loans. Banks and housing finance companies that lend against mortgages would have greater comfort if the mortgage can be guaranteed through a three way contract among borrower, lender and guarantor," he had said.
An NBFC is a company engaged in the business of loans and advances, acquisition of shares and other instruments. Though their nature seems to be like banks, NBFCs cannot accept demand deposits and cannot issue cheques as they are not a part of the payment and settlement system.
Earlier, RBI had come out with draft guidelines for mortgage guarantee companies which said that the essential feature of mortgage guarantee contract would be that it would be unconditional and irrevocable.
The contract would guarantee the repayment of the principal and interest outstanding in the housing loan account of the borrower, up to the amount of guarantee.
Besides, the guarantor will pay the guaranteed amount on invocation without any adjustment against the realisable value of the mortgage, the guidelines said.
Since a separate regulatory framework is being prescribed for mortgage guarantee companies, the central bank exempted them from certain existing provisions for NBFCs like the requirement of registration and maintenance of liquid assets.
In this fiscal's Budget, Finance Minister P Chidambaram had announced that regulations will be put in place to allow the creation of mortgage guarantee companies. These companies are expected to provide comfort to housing finance companies and banks by guaranteeing mortgages.
"Our people want housing loans. Banks and housing finance companies that lend against mortgages would have greater comfort if the mortgage can be guaranteed through a three way contract among borrower, lender and guarantor," he had said.
An NBFC is a company engaged in the business of loans and advances, acquisition of shares and other instruments. Though their nature seems to be like banks, NBFCs cannot accept demand deposits and cannot issue cheques as they are not a part of the payment and settlement system.
Earlier, RBI had come out with draft guidelines for mortgage guarantee companies which said that the essential feature of mortgage guarantee contract would be that it would be unconditional and irrevocable.
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The contract would guarantee the repayment of the principal and interest outstanding in the housing loan account of the borrower, up to the amount of guarantee.
Besides, the guarantor will pay the guaranteed amount on invocation without any adjustment against the realisable value of the mortgage, the guidelines said.
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