The RBI directions for housing finance companies now sit in a single rulebook, the Housing Finance Companies (Reserve Bank) Directions, 2025, issued on 28 November 2025 as part of the Reserve Bank’s consolidation of its Master Directions. On 31 July 2026, the RBI followed this with nine supervisory Directions covering compliance, cybersecurity, fraud, audit and reporting. For the Board, the Chief Risk Officer and the compliance head of a housing finance company (HFC), the practical question is simple: which policies must the Board have approved, which reviews must it carry out, and where do the numbers stand?
This article walks through the answers in the order a Board would want them: what changed, the policies listed in para 14, the reviews in para 15, the prudential basics, and what the July 2026 Directions add. It ends with a readiness checklist and the capability areas HFC teams should plan for.
RBI Directions for Housing Finance Companies: What Changed in 2025 and 2026
- 28 November 2025: The RBI issued the Housing Finance Companies (Reserve Bank) Directions, 2025 (RBI/DoR/2025-26/365). The Directions are effective from the day they were placed on the RBI website and bring HFC requirements on governance, capital, credit, deposits and conduct into one document.
- 31 July 2026: Nine supervisory Directions followed, on the Compliance Function, Cybersecurity and Technology Risk, Digital Payment Security Controls, Fraud Risk Management, Internal Audit, Statutory Audit, Supervisory Returns, Miscellaneous Supervisory matters and the Auditor’s Report.
- What this means in practice: The HFC Directions tell the Board which policies to approve. The July 2026 Directions tell management how to evidence that the controls behind those policies work.
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Para 14: The Board-Approved Policies an HFC Must Have
Para 14 of the HFC Directions gives an illustrative list of policies to be approved by the Board, or by a committee to which the Board has delegated the power. “Illustrative” matters: the list is a floor, not a ceiling, so a Board should treat it as the minimum policy set.
Credit and lending policies
- Lending against gold (para 14(1))
- Exposure limits for consumer credit sub-segments (para 14(3))
- Demand and call loans (para 14(5))
- Loans to directors and related entities (para 14(6))
- Relaxation of terms and conditions of loans (para 14(16))
- Loan rescheduling (para 14(17))
- Valuation of properties and assets, including the empanelment of valuers (para 14(18))
Capital, investment and exposure policies
- Capital adequacy through the Internal Capital Adequacy Assessment Process, or ICAAP (para 14(2))
- Investment policy (para 14(4))
- Sensitive sector exposure limits (para 14(7))
Governance and risk policies
- Appointment of the Chief Risk Officer and safeguards for the CRO’s independence (paras 14(8) and 14(9))
- Fit and proper criteria for directors (para 14(10))
- Compensation policy, including malus and clawback provisions (para 14(11))
- Corporate governance (para 14(12))
Customer-facing policies
- Grievance redressal mechanism (para 14(13))
- Interest rate model (para 14(14))
- Penal charges (para 14(15))
A useful test for the Board: for each item above, can the company show a Board-approved document, an owner, a review date and the minute of the meeting where it was approved?
Read Now: Compliance Training for NBFCs: RBI Requirements, Governance and Regulatory Readiness
Para 15: The Four Periodic Board Reviews
Para 15 lists reviews the Board itself is expected to carry out. These are Board-level oversight tasks, not management reports, so the review and the Board’s discussion should both be visible in the minutes.
- Risk management system: progress on the risk management framework and the policies that support it.
- Corporate governance compliance: compliance with governance requirements across the Board’s committees.
- Fair Practices Code: compliance with the Fair Practices Code in dealings with borrowers.
- Construction loans: physical verification and monitoring of project progress for loans given to builders and developers.
Practical tip: build these four reviews into the Board’s annual calendar so that each one is scheduled, assigned to a committee and followed by an action tracker.
Prudential Basics Every HFC Board Should Know
Policies work only inside the capital and lending limits the Directions set. The figures below are the ones Boards most often need at hand.
- Net Owned Fund (para 16): a minimum of ₹20 crore to commence housing finance as the principal business.
- Capital adequacy (para 20): capital of at least 15% of aggregate risk-weighted assets, with Tier 1 capital of at least 10% at all times. Tier 2 capital cannot exceed 100% of Tier 1.
- Loan-to-value caps (para 58): up to ₹30 lakh, the LTV ratio cannot exceed 90%; above ₹30 lakh and up to ₹75 lakh, 80%; above ₹75 lakh, 75%.
- Deposit-taking HFCs (para 79): public deposits cannot exceed twelve times Net Owned Fund. Para 76 also sets minimum holdings of unencumbered approved securities and liquid assets, with the percentages stepping up from 1 July 2025.
Link to policy: the LTV caps feed directly into the valuation policy under para 14(18), and the capital ratios feed into the ICAAP under para 14(2).
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What the July 2026 Directions Mean for HFCs
Each of the nine July 2026 Directions has its own applicability, usually by size, deposit-taking status or type of NBFC. HFC teams should read each one against their own profile. Points that mention HFCs include:
- Statutory Audit: applies to NBFCs, including HFCs, with assets of ₹1,000 crore and above, and to all deposit-taking NBFCs. Boards should review the auditor appointment policy.
- Internal Audit: applies to deposit-taking companies and, for non-deposit-taking companies, at ₹5,000 crore and above. This drives the need for a risk-based internal audit policy.
- Fraud Risk Management and Cybersecurity: HFCs report fraud and cyber incidents to the National Housing Bank, so the fraud policy, early warning signals and incident response plan should name that reporting line.
- Grievance redressal: the Reserve Bank Integrated Ombudsman Scheme, 2026 does not extend to HFCs, so the company’s own grievance redressal policy under para 14(13) carries the full weight.
- Compliance Function: confirm with your legal or compliance adviser how the Compliance Function Directions apply to your HFC, alongside the governance provisions of the HFC Directions.
A Practical Readiness Checklist for HFC Boards
- Map policies to para 14. Prepare a one-page register listing each para 14 item, the policy title, the approving authority, the approval date and the next review date.
- Close valuation gaps. Check that the valuation policy covers property and asset valuation and the empanelment of valuers, and that LTV caps are built into loan sanction systems.
- Evidence the para 15 reviews. Confirm that all four reviews are on the Board calendar and recorded in minutes, with construction loan monitoring supported by site verification records.
- Protect CRO independence. Align the CRO appointment and independence safeguards with para 14(8) and 14(9), and confirm the reporting line.
- Align customer policies. Read the interest rate model, penal charges and grievance redressal policies together, so that what the customer is told matches what the system charges.
- Test the July 2026 fit. For each of the nine Directions, record whether it applies, the owner, and the date by which the policy or process will be updated.
- Train the people who run the controls. Policies are only as good as the teams applying them at branch, credit, operations and compliance level.
Building Team Capability Across HFC Functions
- Board and senior management: the regulatory architecture for NBFCs, Board oversight duties, and how governance failures escalate into supervisory action.
- Compliance and internal audit: regulatory change management, risk-based monitoring, reporting, breaches and escalation.
- Risk and credit: credit policy, exposure limits, ICAAP, liquidity and asset-liability management.
- Operations and customer service: KYC, AML and customer due diligence, Fair Practices Code, grievance handling and recovery conduct.
- IT and information security: cybersecurity, technology risk, outsourcing and business continuity.
Frequently Asked Questions
What are the para 14 policies in the HFC Directions?
Para 14 lists eighteen illustrative items that the Board, or a committee it has delegated to, should approve. They range from lending against gold and ICAAP to the interest rate model, penal charges, loan rescheduling and valuation of properties.
What is the minimum Net Owned Fund for an HFC?
Para 16 sets a minimum Net Owned Fund of ₹20 crore to commence housing finance as the principal business.
What are the loan-to-value limits for HFC home loans?
Para 58 sets the caps at 90% for loans up to ₹30 lakh, 80% for loans above ₹30 lakh and up to ₹75 lakh, and 75% for loans above ₹75 lakh.
What capital ratios must an HFC maintain?
An HFC must maintain capital of at least 15% of aggregate risk-weighted assets, of which Tier 1 must be at least 10% at all times (para 20).
Do all the July 2026 Directions apply to every HFC?
Not automatically. Applicability differs by size, deposit-taking status and the type of institution, so each Direction should be read against the HFC’s own profile and recorded in a compliance register.
This article is an educational summary of publicly available RBI Directions and is not legal advice. Please refer to rbi.org.in for the authoritative text and confirm applicability to your company.
Build This Capability with RMAI
The Risk Management Association of India (RMAI) supports HFC and NBFC teams with self-paced, case-based learning aligned to what the RBI expects. Two programmes to start with:
- Online Training on Risk and Governance in NBFCs: a 10-hour programme on NBFC regulation, governance and risk oversight, with real Indian failure case studies.
- Governance, Risk and Compliance (GRC) Certificate Course: a 12-hour programme for compliance officers, internal auditors, risk professionals, company secretaries and board members.
