Key Developments since last meeting of Chief Executives

Key Developments since last meeting of Chief Executives of HFCs Department of Regulation & Supervision April 20, 2012 1

Presentation Outline 1. Notifications Issued 2. Circulars Issued 3. Caution Advices Issued 4. HFCs – Key Statistics 5. Grievance Redressal System 6. Multiple Financing – A Brief Case Study 2

Notification issued under NHB Act, 1987 • No. NHB. HFC. DIR. 4/CMD/2012 dated 19 th January, 2012 : Definition of Public Deposit, Commercial Real Estate Provisioning requirement, Modification in HFC: DIR-I, etc. Amendment of HFCs (NHB) Directions, 2010 A. Definition of Public Deposit – Commercial Paper Exclusion B. Provisioning requirement – 1% on total outstanding loan amount for Standard Assets in respect of Commercial Real Estate C. Amendment in HFC: DIR- Schedule-I 3

Policy Circular No. 41 dt. 26 -09 -2011 Disclosure in the Balance Sheet • HFCs have been advised to distinctly indicate under separate heads of account for housing and nonhousing finance business and individually for each type of asset in the Balance Sheet as under: (a) Provisions for sub standard, doubtful and loss assets; and (b) Provisions for depreciation in investments. • Bank has also provided the illustrative list of loans with the Circular for enabling the classification of housing and non housing loans. 4

Policy Circulars No. 42 dt. 11 -10 -2011 & 47 dt. 29 -03 -2012 List of Terrorist Individuals/Organizations – under UNSCR 1267 (1999) and 1988 & 1989 (2011) on Taliban/AL-Quaida Organization All HFCs are required to update the list of List of Terrorist Individuals/ Organizations under UNSCR 1267 (1999) and 1822 (2008) on Taliban/Al-Qaida Organization. 5

Policy Circulars No. 43 dt. 19 -10 -2011 & 48 dt. 04 -04 -2012 Pre-payment penalty on pre-closure of housing loans • It was advised that pre-payment levy or pre-closure charges should not be levied by the HFCs with immediate effect on the borrowers – Where the housing loan is on floating interest rate basis (pre-closed through any source). – Where the housing loan is on fixed interest rate basis (preclosed by the borrowers out of their own sources). The expression “own sources” for this purpose means any source other than by borrowing from a bank/HFC/NBFC and/ or a financial institution. • Recently, Bank vide its Circular dated April 4, 2012 clarified that the instruction applicable to fixed interest rate housing loans referred to in the Circular No 43 shall apply to housing loans given on Special Rate basis. 6

Policy Circulars No. 44 dt. 19 -10 -2011 & 46 dt. 23 -02 -2012 Uniformity in charging interest (floating rate basis) for old and new customers • Bank had vide its Circular No. 44 advised the HFCs to ensure uniformity in rates, on floating rate basis, charged to their old and new customers, with the same risk profile etc. • Bank has reviewed the position and clarified vide Circular No. 46 as follows: – Earlier instructions are mandatory and applies to all Housing Loans disbursed on or after 19 -10 -2011 – HFCs should complete Risk profiling of customers by 3004 -2012, and convey the same to borrowers. – existing customers as on the date of Circular dated 19 -102011, the matter is under Bank’s examination. 7

Policy Circular No. 49 dt. 09 -04 -2012 Computation of Loan to Value (LTV) Ratio Bank has advised HFCs to compute the LTV ratio as a percentage with total outstanding in the account (viz, “principal + accrued interest + other charges pertaining to the loan” without any netting) in the numerator and the realizable value of the residential property mortgaged to the HFC in the denominator. 8

Miscellaneous Circular No. 7 dt. 03 -01 -2012 Grievance Redressal Mechanism in HFCs • Bank has advised that every HFC should put in place a complaint and grievance redressal mechanism in each of its offices, publicize it and also make it available on its web-site. • Further, Bank has also advised HFCs to ensure that all disputes are heard and disposed off in a time bound manner and to clearly display in all offices/branches and on their web sites that in case the complainant does not receive response from the company within reasonable time or is dissatisfied with the response received, the complainant may approach the National Housing Bank. 9

Caution Advice Nos. 20 dt. 30 -12 -2011 & 21 dt. 16 -03 -2012 • During the period under review, caution advices no. 20 and 21 were issued by the Bank covering approx. 332 number of fraudulent transactions. • Soft copy of Caution Advices can also be downloaded from Bank’s website. • The HFCs are required to submit information on fraudulent transaction to NHB on regular basis. HFCs may circulate the caution advice to all their branches for keeping them informed regarding various modus operandi of housing loan frauds. 10

Work-shop cum Training Programme on Central Forms Repository (CFR) System • Bank has arranged work-shop cum training programme on Central Form of Repository (online submission of returns)on 23 -12 -2011 at its Head office in Delhi. • Provided CDs to participants, having Manual and Guidance Note 11

Certificate of Registration (Co. R) under Section 29 A of the NHB Act, 1987 • Bank has granted Certificate of Registration to Milestone Home Finance Company Private Limited having its registered office in Mumbai • Bank has cancelled the Certificate of Registration of Haware’s Housing Development Finance Corporation Ltd. 12

Outstanding Loans, Public Deposits, Total Borrowings & NNPAs of HFCs Rs. in crore Details Housing Loans Non Housing Loans Total Loans Public Deposits Total Borrowings NNPAs Outstanding as at end of 31. 03. 2011 Outstanding as at end of 29. 2. 2012 1, 86, 442 2, 17, 296 61, 343 73, 412 2, 47, 785 2, 90, 708 28, 694 28, 693 1, 98, 023 2, 30, 798 413 975 13

HFCs Network of Branches … • 1, 318 branches as on 31 -03 -2011 were increased to 1, 677 branches as on 31 -12 -2011 • 359 branches were increased by the registered HFCs in the different States/UTs between April to December, 2011. 14

… HFCs Network of Branches … Name of the State/UT Branches as on Dec. 31, % of States/UTs to 2011 total branches Madhya Pradesh 96 5. 72 Chhattisgarh 22 1. 31 Delhi 58 3. 46 Maharashtra 295 17. 59 Karnataka 171 10. 20 Rajasthan 87 5. 19 Uttar Pradesh 68 4. 05 15

… HFCs Network of Branches … Name of the State/UT Branches as on Dec. % of States/UTs to 31, 2011 total branches Uttrakhand 16 0. 95 Jharkhand 9 0. 54 Himachal Pradesh 5 0. 30 37 2. 21 Arunachal Pradesh 3 0. 18 Assam 6 0. 37 Meghalaya 1 0. 06 15 0. 89 2 0. 12 Haryana Mizoram Jammu & Kashmir 16

… HFCs Network of Branches … Name of the State/ UT Branches as on Dec. 31, 2011 % of States/UTs to total branches Gujarat 151 9. 00 Tamil Nadu 226 13. 48 Andhra Pradesh 146 8. 71 Kerala 118 7. 04 West Bengal 41 2. 44 Punjab 34 2. 03 7 0. 42 17 1. 01 Goa Odisha 17

… HFCs Network of Branches Name of the State/ UT Branches as on Dec. 31, 2011 % of States/UTs to total branches Bihar 6 0. 36 Manipur 9 0. 54 Nagaland 1 0. 06 Andaman & Nicobar 1 0. 06 Sikkim 1 0. 06 Puducherry 9 0. 54 Chandigarh 18 1. 07 1 0. 06 1, 677 100. 00 Tripura Total 18

Complaints received against HFCs … • Bank is receiving complaints against HFCs – directly from Customers, through Government of India, RBI, etc. , especially relating to the following issues: – Interest rates – Loan administration – Post repayments – Defaults – Rejection of loan application – Others 19

… Complaints received against HFCs … • Deposit related complaints (3) SN 1 2 3 Nature of Complaint Premature withdrawal without payment of interest Non receipt of TDS Amount Delayed payment of FDR etc. Jan. to Mar. , 2012 1 0 2 • Loan related complaints (257) 1 2 3 4 5 6 Interest rates Loan administration Post repayments Defaults Rejection of loan application Others 74 126 48 0 1 8 20

… Complaints received against HFCs • HFCs are advised to act fairly and in a transparent manner, and provide complete information to customers on interest rate, common fees and charges, etc. • Every HFC should have a system and a procedure for receiving, registering and disposing of complaints and grievances in each of its offices/ branches. 21

MULTIPLE FINANCING – A BRIEF CASE STUDY … • Total Number of HFCs involved : 8 • Total Number of Loans disbursed by HFCs : 290 • Total Amount of Loan involved (Rs. crore) 70. 42 : 22

Multiple Financing – A Brief Case Study … Model 1 : Involvement of many HFCs and Banks HFCs 1 to n Br 1 Brn Flat 1 Banks*1 to n Br 1 Brn Flatn * - Details not available with NHB 23

… Multiple Financing – A Brief Case Study … Model 2 : Involvement of many HFCs HFC 1 Brn Flat 1 HFCn Br 1 Brn Flatn 24

… Multiple Financing – A Brief Case Study … Model 3 : Involvement of many branches of an HFC Br 1 Br 2 Flat 1 Flat 2 Br 3 Brn Flat 3 Flatn 25

… Multiple Financing – A Brief Case Study Model 4 : Involvement of single branch of an HFC Br 1 Br 2 Flat 1 Flat 2 Br 3 Brn Flat 3 Flatn 26

Thank you 27