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RBI Harmonizes HFCs' NCD Private Placement Guidelines with NBFC Regulations.

Banking & Finance | Dated: 01 Feb 2025

In January 2025, the Reserve Bank of India (RBI) announced the alignment of regulations for the private placement of non-convertible debentures (NCDs) by housing finance companies (HFCs) with those applicable to non-banking financial companies (NBFCs).

🎯 Key Highlights:

  • - This change replaces the existing framework under Chapter XI of the Master Direction Non-Banking Financial Company Housing Finance Company (Reserve Bank) Directions, 2021, with new guidelines in line with Paragraph 58 of the Master Direction NBFC Scale Based Regulation) Directions, 2023.
  • - As a result, HFCs will now follow the same rules and guidelines as NBFCs when issuing NCDs, and previous HFC-specific guidelines on NCD issuance have been repealed.
  • - The updated guidelines will take effect on January 29, 2025, and will apply to all new private placements of NCDs issued by HFCs with maturities exceeding one year.

💡 Other Important Facts:

  • (i) Under the NBFC Scale-Based Regulation, companies must formulate a board-approved policy for resource planning, specifying the planning horizon and frequency of private placements. The minimum subscription per investor is set at ₹20,000, and private placements of NCDs are categorized into two segments: those with a maximum subscription of less than ₹1 crore per investor and those with a minimum subscription of ₹1 crore and above per investor.
  • (ii) For NCDs with a maximum subscription of less than ₹1 crore per investor, the total number of subscribers is limited to 200 per financial year, and these subscriptions must be fully secured.
  • (iii) Non-convertible debentures (NCDs) are fixed-income instruments issued by high-rated companies to raise long-term capital. They offer higher interest rates than convertible debentures and can be invested in by individuals, banks, and institutions but cannot be converted into equity or stock.

📚 Test Your Knowledge:

Recently, the RBI aligned the private placement norms for non-convertible debentures (NCDs) of housing finance companies (HFCs) with which financial entities?

Correct Answer: NBFCs

🚀 Quick Recap:

About RBI

  • Governor : Sanjay Malhotra
  • Headquarter : Mumbai