The government will soon give the Reserve Bank of India (RBI) power to regulate housing finance companies (HFCs), which will almost certainly lead to the lenders facing stringent asset quality reviews, two sources with direct knowledge of the matter said.
That could have major repercussions for about 80 HFCs, the largest of which include Indiabulls Housing Finance, Housing Development Finance Corporation (HDFC) and Dewan Housing Finance Corporation, leading to them facing unprecedented scrutiny and the potential for major financial penalties and restriction on their activities if improper practices are discovered.
In late 2015, the RBI started a similar review of bank assets amid allegations that lenders were hiding the extent of the bad debts on their books.
The housing finance companies, which are part of the broader shadow banking sector known as non-banking finance companies (NBFCs), are currently regulated by the National Housing Board, and RBI has no direct authority over them.
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