The Reserve Bank of India (RBI) has updated the risk weight guidelines for Housing Finance Companies (HFCs) as per its circular dated August 12, 2024. The modifications address two main areas: Firstly, the risk weighted assets for undisbursed housing and other loans will now be capped at the level of risk weighted assets for an equivalent amount of disbursed loans, correcting potential discrepancies. Secondly, the risk weight for fund-based and non-fund based exposures to Commercial Real Estate – Residential Buildings classified as standard will be set at 75%. For non-standard exposures in this category, the risk weight will follow the ‘Other Assets (Others)’ category, which is currently at 100%.
Reserve Bank of India
RBI/2024-25/62
DOR.CRE.REC.33/08.12.001/2024-25 Dated: August 12, 2024
Housing Finance Companies
Madam/ Dear Sir,
Review of Risk Weights for Housing Finance Companies (HFCs)
Please refer to Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021 dated February 17, 2021, as updated from time to time. On a review, it has been decided to carry out the following modifications:
(i) Risk weighted assets for undisbursed amount of housing loans/other loans – In order to address a potential anomaly in computation of risk weighted assets for undisbursed amount of housing loans/other loans vis-à-vis that for an equivalent disbursed amount of similar exposures, it has been decided that the risk weighted assets computed for undisbursed amount of housing loans/other loans as per step 1 and step 2 of paragraph 6.3.1 of the Master Direction ibid, shall be capped at the risk weighted asset computed on a notional basis for equivalent amount of disbursed loan.
(ii) Risk weight for Commercial Real Estate – Residential Building – With reference to Sr. No. 3(d)(i)(a) under paragraph 6.2, the risk weight of fund- based and non-fund based exposures to ‘Commercial Real Estate-Residential Building’, which are classified as standard, shall be 75 per cent. For exposures under this category, which are not classified as standard, the risk weight shall be as per the category ‘Other Assets (Others)’ as indicated at Sr. No. 6(d) of paragraph 6.2 of the Master Direction ibid (which presently is at 100 per cent).
2. The above instructions shall be applicable from the date of issue of this circular. All other instructions of the Master Direction ibid remain unchanged.
Yours faithfully,
(Vaibhav Chaturvedi)
Chief General Manager
