The Reserve Bank of India (RBI) has proposed stricter rules for housing finance companies (HFCs) that accept public deposits to ensure that they come at par with non-banking financial companies (NBFCs).

The central bank, in a draft circular, seeks deposit-taking HFCs to raise their total liquid assets, along with unencumbered approved securities, to 15% of public deposits by the end of March 2025. The current requirement is 13%.

This upper ceiling will be in a phased manner. The HFCs need to take the percentage of liquid assets to 14% by 30 September 2024, before moving to 15%.

"Since the regulatory concerns associated with deposit acceptance is same across all categories of NBFCs, it has been decided to move HFCs towards the regulatory regime on deposit acceptance as applicable to deposit-taking NBFCs and specify uniform prudential parameters," the RBI said.

The central bank has also proposed the ceiling on public deposits held by HFCs be halved to 1.5 times of net-owned funds from 3 times.

According to the circular, housing finance companies' public deposits shall be repayable between one year to five years.

Since the transfer of regulation of HFCs from the National Housing Bank to the RBI from August 2019, the central bank has been issuing regulations that treat HFCs as a category of NBFCs.

As per the RBI’s proposal, housing finance companies' boards should set limits for investments in unlisted shares. It also proposed HFCs be allowed to hedge risks arising from their operations.

The RBI has sought comments on the draft circular from stakeholders by 29 February.