National Housing Bank proposes to increase capital adequacy ratio to 15%

To improve solvency of housing finance companies, the regulator National Housing Bank (NHB) has proposed to increase capital adequacy ratio to 15 per cent in a phased manner. The proposed norms are being issued in the wake of liquidity problem being faced by housing finance companies (HFCs) after IL&FS crisis. NBFC sector including HFCs came under pressure after series of default by group companies of IL&FS beginning September last year. Keeping in view the long term nature of the housing finance business model and requirement of long term capital, the following proposal relating to progressive increase in the minimum capital adequacy requirement for HFCs, from the present stipulation of 12% in phased manner to 15% by March 31, 2022, NHB said in the draft guidelines. As per the roadmap, HFCs have to increase minimum Capital Adequacy Ratio (CAR) to 13% by March 31 next year and 14% by March 31, 2021.