The government in the Union Budget 2019-20 has taken away the powers of the National Housing Bank (NHB) to regulate housing finance companies (HFCs) and handed them to the Reserve Bank of India (RBI).
The Reserve Bank of India (RBI) Act is amended to give the RBI powers to regulate the HFC sector.
NHB was part of the RBI till April 2019 when the government decided to take it over.
NHB, besides being the refinancer and lender, is also regulator of the housing finance sector. This gives a somewhat conflicting and difficult mandate to NHB. That is why GOI returned the regulation authority over the housing finance sector from NHB to.
Experts say this move would ensure that there is greater parity in regulations for NBFCs and HFCs.
However, HFCs, which so far have conducted business with light-touch regulation, will likely face intense scrutiny.
This also enables the RBI to directly give liquidity support to the ailing HFC sector.
As soon as the RBI got the regulatory powers, it offered a liquidity window to banks to help support NBFCs and HFCs.