With a view to consolidate the existing regulatory framework applicable to housing finance companies (‘HFCs’), the RBI, on February 17, 2021, issued the Non-Banking Finance Company - Housing Finance Company (Reserve Bank) Directions, 2021 (‘HFC Master Direction’).

HFCs were previously regulated by the National Housing Board (‘NHB’). Subsequently, in August 2019, the National Housing Banking Act, 1987 (‘NHB Act’) was amended pursuant to the Finance Act, 2019, transferring regulatory authority from the NHB to the RBI, primarily to ensure regulatory parity with non-banking financial companies (‘NBFCs’). Thereafter, the RBI, on October 22, 2020, issued a regulatory framework for HFCs (‘RBI HFC Regulations 2020’), treating HFCs as a separate category of NBFCs. While the RBI HFC Regulations 2020 covered all major provisions pertaining to HFCs, certain aspects continued to be governed by the NHB and exemptions available to HFCs in respect of Section 45-IA (Requirement of registration and net owned funds), Section 45-IB (Maintenance of percentage of assets) and 45-IC (Reserve fund) of the Reserve Bank of India Act, 1934 continued to apply.

With the HFC Master Direction coming into force with immediate effect, the corresponding guidelines issued by the NHB as well as the RBI HFC Regulations 2020 now stand repealed. Applicable to every HFC registered under Section 29A of the NHB Act (other than Chapter XII of the HFC Master Direction, which specifically applies to auditors of HFCs), the HFC Master Direction neither imposes new requirements nor amends any existing regulations.