Foreign investors may be allowed in as mortgage guarantors

Mumbai: According to draft guidelines issued by the RBI on mortgage guarantee companies, foreign investors may be allowed as "significant" investors in the proposed mortgage guarantee company subject to approvals from Foreign Investment Promotion Board /FEMA.

Certain conditions apply in this case like the foreign investor should be a well diversified entity in its home country, should be regulated by its financial regulator and have a good track record of operating as a mortgage company, said an RBI notification.

The RBI''s guidelines come in the wake of the Finance Minister''s announcement in the Union Budget that regulations would soon be put into place for the creation of mortgage guarantee companies for facilitating the growth of home loans.

According to the draft guidelines, a mortgage guarantee company should have a minimum net owned fund of Rs100 crore at the time of commencement of business, which should be augmented to Rs 300 crore within three years from the date of commencement of business, said the notification. The company would also be required to maintain 12 per cent of its aggregate risk weighted assets as the minimum capital adequacy ratio.