Credit flow to realty sector needs to improve: RBI governor

While stressing that loans to the real estate sector needed to improve, RBI governor Shaktikanta Das said that credit growth in the country has moderated to 7%-7.5%

Reserve Bank of India (RBI) governor Shaktikanta Das, on February 24, 2020, said that slowing credit growth was one of the major challenges that banks were currently facing. So far this year, credit growth in the country has moderated to 7%-7.5%. “The most critical challenge today for banks, not just in India but also elsewhere, is slowing credit offtake. It affects the profitability of banks,” Das said at a banking conclave in Mumbai. Credit flow to the realty sector needs to improve, he added.

Speaking about NBFCs, he said that credit flow to small NBFCs have improved over the last one year. “Flow of credit has stabilised and is showing steady improvement,” Das said. The asset-liability management (ALM) position and other relevant aspects of top 50 NBFCs are being closely monitored, which covers all NBFCs with asset size above Rs 5,000 crores. “The ALM of top 51-100 NBFCs is also being examined by the respective regional offices of the Reserve Bank,” he said.


NHB asks HFCs to stop offering loans under subvention/pre-EMI schemes

With several complaints of frauds coming to the fore, the National Housing Bank has asked housing finance companies to refrain from offering loans where real estate developers pay pre-EMIs on behalf of home buyers

July 23, 2019: Worried over frauds by builders, the National Housing Bank (NHB) has asked housing finance companies (HFCs) to ‘desist’ from offering loans under subvention schemes, wherein, real estate developers pay pre-EMIs on behalf of home buyers for a certain period. The direction has been issued by the NHB, in view of several complaints of frauds allegedly committed by certain builders using subvention schemes.

“Based on a review of the matter, HFCs are advised to desist from offering loan products involving servicing of the loan dues by builders/developers, etc., on behalf of the borrowers,” the NHB said in a circular. It has clarified that the stipulation related to subvention scheme would also be effected in cases wherein the HFC is yet to commence disbursements under the sanctioned cases. Citing its earlier order in 2016, the NHB said that disbursal of housing loans by HFCs should be strictly linked to the stages of construction and no upfront disbursal should be made, in case of incomplete/un-constructed projects.

In cases of projects sponsored by government/statutory authorities, HFCs may disburse the loans as per the payment stages prescribed by such authorities, even where payments sought from house buyers are not linked to the stages of construction, provided such authorities have no past history of non-completion of projects.

“HFCs should have in place a well-defined mechanism for effective monitoring of the progress of construction of housing projects and obtaining consent of the borrower(s), prior to the release of payments to the builder/developer,” it added. Merely obtaining a borrower’s consent and release of funds by the company without linkage to the stage of construction will be seen as dereliction of duty by the HFC, the NHB warned.


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