NHB operationalising liquidity infusion window for HFCs

The National Housing Bank is operationalising liquidity infusion facility of Rs 10,000 crore for housing finance companies (HFCs). This would provide additional liquidity to individual housing loans for affordable housing and avoid credit crunch in housing finance.

"To further ease flow of funds to the housing sector, the National Housing Bank (NHB) is making available from Friday a liquidity infusion facility of Rs 10,000 crore for housing finance companies (HFCs) as additonal liquidity for individual housing loans for affordable housing and this will supplement two current refinance schemes of NHB", a Finance Ministry statement said.

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Soon after the Budget, the RBI had taken steps for banks to avail additional Rs 1.34 lakh crore liquidity against G-secs holding for lending to NBFCs. The additional liquidity worth Rs 1.34 lakh crore to banks was meant to be used for on-lending to NBFCs which have been dried of funds since last September after industry major IL&FS went bankrupt.

Banks usually hold much more than the mandated 19 per cent SLR (statutory liquidity ratio) by holding more government securities which on average is around 23-25 per cent for the system. 

The central bank also decided to front load the facility for liquidity coverage ratio which sees it increasing by 0.5 per cent each in August and December 2019.

The government has handed over the regulatory supervision of housing finance companies (HFCs) to the Reserve Bank of India in this Budget to ensure greater parity in regulations for NBFCs and HFCs and also more checks and balances from the earlier minimum regulations. 

Now RBI will provide liquidity support to the ailing HFC sector directly. RBI has offered a liquidity window to banks to help support NBFCs and HFCs.