The
Presidents/Chief Executives,
All
Banks/DFIs
Dear
Sirs/Madam,
HOUSING
FINANCE: RELAXATIONS IN THE REGULATIORY FRAMEWORK
In
order to facilitate origination of housing loans and securitization
of mortgage/construction/developer finance, following relaxations
in the present regulatory framework are allowed to Banks/DFIs:
Removal
of Per-Party Limit:
2. Keeping in view the active role of banks/DFIs for the
provision of housing finance to a cross section of the society,
the maximum per party limit of Rs.10 million in respect
of housing finance, as per Regulation R-15 of the Prudential
Regulations for Consumer Financing, is being removed with
immediate effect. Accordingly, banks/DFIs are allowed to
determine the housing finance limit in accordance with their
internal credit policy, credit worthiness and loan repayment
capacity of the borrowers. At the same time, while determining
the credit worthiness and repayment capacity of the prospective
borrower, banks/DFIs shall ensure that the total monthly
amortization payments of consumer loans, inclusive of housing
loan, should not exceed 50% of the net disposable income
of the prospective borrower. Moreover, Banks/DFIs are advised
to observe strict compliance to R-16 to R-22 of the Prudential
Regulations for Consumer Financing and BPD Circular No.32
of 2004 while undertaking housing finance as part of their
Consumer Banking operations.
Facilitating
Securitization of Mortgage/Construction/Developer Finance:
3. In order to facilitate securitization of mortgage/construction/developer
finance through Special Purpose Vehicle (SPV) in accordance
with BPD Circular No.31 dated November 14, 2002, banks/DFIs
are allowed the following relaxations with respect to Listed
and Unlisted Mortgage /Construction/Developer Finance Asset
Backed Securities (ABS):
a. Listed ABS: The minimum credit rating for banks/DFIs
to make direct investment and for taking exposure (i.e.
undertaking lending and reverse repo) against listed ABS
for mortgage/construction/developer finance is reduced from
“A” to “A- (or equivalent)”.
b. Unlisted ABS: Banks/DFIs are allowed
to invest in non-listed mortgage/construction/developer
finance ABS having a minimum credit rating of “A-
(or equivalent)” as well as to take exposure (i.e.
undertaking lending and reverse repo) against the security
of such non-listed ABS. Regulation R-6(1-A)(c) of PRs for
Corporate/Commercial Banking is accordingly modified.
4.
Please acknowledge receipt.