RBI Aligns HFC Regulations with NBFC Norms for Private Placement of NCDs

The Reserve Bank of India (RBI) has issued a circular dated January 29, 2025, aligning the guidelines for the private placement of non-convertible debentures (NCDs), with maturity more than one year, by housing finance companies (HFCs) with those applicable to non-banking financial companies (NBFCs). This move aims to create a uniform regulatory framework and enhance transparency in fundraising activities by HFCs.

As per the RBI’s notification, the revised guidelines will apply to all fresh private placements of NCDs with maturities exceeding one year by HFCs, with immediate effect.

These changes replace the existing regulations under Chapter XI of the Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021.

Key Changes in the Regulatory Framework

• Board-Approved Policy: HFCs must establish a board-approved resource planning policy, covering aspects such as the planning horizon and the frequency of private placements.
• The minimum investment per investor is set at ₹20,000.
• Categorization of NCDs: Private placements of NCDs will be classified into two segments:

(i) NCDs with a maximum subscription of less than ₹1 crore per investor

(ii) NCDs with a minimum subscription of ₹1 crore and above

• For NCDs with a maximum subscription of less than ₹1 crore, the number of investors is restricted to 200 per financial year. Additionally, these subscriptions must be fully secured.

This regulatory update ensures that HFCs follow a structured and risk-mitigated approach similar to NBFCs when raising funds through private placements. By mandating a board-approved policy and investor safeguards, the RBI aims to enhance financial stability and investor confidence in the housing finance sector.

With these revised norms, HFCs will need to align their fundraising strategies to comply with the updated regulatory framework, reinforcing governance and risk management practices in the industry.