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NATIONAL HOUSING BANK ACT, 1987

53 of 1987

23rd December, 1987

Housing is a basic need and serves to fulfill the fundamental objective of providing shelter. The existing institutional framework for providing housing finance is yet to develop fully. It is. therefore, necessary to create a housing finance structure through establishment of appropriate institutions at various levels which would mobilise resources and promote housing activity. 2. A high level group which looked into the problem, recommended that a National Housing Bank be established as an apex housing financial institution to function as the principal agency for the promotion of housing finance institutions at various levels, to co-ordinate the activities of these institutions, to promote mobilisation of resources for housing and to extend financial support to the housing finance institutions. 3. The Bill seeks to provide for the establishment of a National Housing Bank with a view to give effect to the aforesaid recommendations of the high level group. In addition the National Housing Bank will also plan a role in the formulation of policies designed to promote housing in the country and provide guidelines for the working of all the agencies connected with housing. 4. The Notes and clauses appended to the Bill explain the provisions of the Bill. -Gaz. of bid., 28-8-87, Pt. II. S. 2, Ext. p. 32 (No. 34). Prefatory Note—Statement of Objects and Reasons.—The National Housing Bank was established in July, 1988 under the National Housing Bank Act, 1987 to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support to such institutions and for matters connected therewith or incidental thereto. To meet the objectives aforesaid, the National Housing Bank was also conferred powers to regulate the deposit acceptance activities of the housing finance institutions similar to those available to Reserve Bank of India in respect of non-banking financial companies. The powers of the Reserve Bank of India to control the activities of non-banking financial companies were further strengthened by the Reserve Bank of India (Amendment) Act, 1997. The housing finance companies which are sub-set of non-banking financial companies were exempted from the provisions of the Reserve Bank of India Act, as amended in 1997, for the reason that such companies fall under the regulatory frame work of the National Housing Bank. Thus there arose the necessity to confer powers on the National Housing Bank similar to those available to the Reserve Bank of India after the above amendment. These proposed provisions will enable the National Housing Bank to safeguard the interest of depositors and promote healthy and universal growth of housing finance companies in the country. 2. Housing loans are generally of long term duration and consequently the funds of housing finance institutions get locked up in mortgages. There is need to augment their capacity to provide more finance by adopting asset securitisation and development of a secondary mortgage market in the country. The National Housing Bank, being the principal agency in the field of housing finance, is being entrusted with the responsibility to develop such market in housing mortgages in the country, 3. There has been a long standing demand from the housing finance institutions for a speedier method of recovery of dues from the defaulting borrowers. It is proposed to provide for a simple, speedy and cost effective method of recovery of overdues by the housing finance institutions by providing for the sale of property charged as security for the assistance granted by such institutions through recovery officers. A provision is also being made for establishment of Appellate Tribunal to hear appeal against the decision of recovery officer. 4. With the introduction of economic reforms, it has been considered necessary to enlarge the capital and shareholder's base of the National Housing Bank. Consequently, it is proposed to provide for enhancement of the authorised capital of the National Housing Bank to rupees three hundred fifty crores with an enabling provision for further increase up to rupees two thousand crores. It is also proposed that the National Housing Bank may offer its shareholding to institutions, besides the Reserve Bank of India, in such manner that the Reserve Bank of India, the Central Government, public sector banks, public financial institutions or other institutions owned or controlled by the Central Government, shall in aggregate at any time hold not less than fifty-one per cent of the issued capital of the National Housing Bank. It is also proposed to provide for restructuring of the Board of Director of the National Housing Bank. 5. In the light of the experience gained in the operations of the National Housing Bank since its establishment, it is felt necessary to bring certain amendments to the said Act for the smooth working of the National Housing Bank and to authorise it to undertake certain additional business of financing of agricultural and rural development banks, making of loans and advances for residential township-cum-housing development projects, undertaking securitisation of loans, setting up of mutual fund and undertaking or participating in housing mortgage insurance business. 6. The Bill seeks to achieve the aforesaid object.

An Act to establish a bank to be known as the National Housing Bank to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support to such institutions and for matters connected therewith or incidental thereto. Be it enacted by Parliament in the Thirty eighth Year of the Republic of India as follows:-

SECTION 01: SHORT TITLE, EXTENT AND COMMENCEMENT

(1) This Act may be called the National Housing Bank Act, 1987.

(2) It extends to the whole of India.

(3) It shall come into force on such date¹as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and any reference in any provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

SECTION 02: DEFINITIONS

In this Act. unless the context otherwise requires:-

(a) "Board" means the Board of Directors of the National Housing Bank referred to in section 6;

(b) "Chairman" means the Chairman of the Board appointed under section 6;

(d) "housing finance institution" includes every institution, whether incorporated or not, which primarily transacts or has as its principal object, the transacting of the business of providing finance for housing, whether directly or indirectly;

(e) "Managing Director" means the Managing Director appointed under section 6-;

(f) "National Housing Bank" means the National Housing Bank established under section 3-;

(g) "notification" means a notification published in the Official Gazette,

(h) "Prescribed" means prescribed by regulations made under this Act;

(i) "Reserve Bank" means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934;

(j) words and expressions used herein and not defined but defined in the Reserve Bank of India Act, 1934, shall have the meanings respectively assigned to them in that Act;

(k) words and expressions used herein and not defined either in this Act or in the Reserve Bank of India Act 1934, but defined in the Banking Regulation Act, 1949, shall have the meanings respectively assigned to them in the Banking Regulation Act, 1949.

SECTION 03: ESTABLISHMENT AND INCORPORATION OF NATIONAL HOUSING BANK

(1) With effect from such date²as the Central Government may, by notification, appoint, there shall be established for the purposes of this Act, a bank to be known as the National Housing Bank.

(2) the National Housing Bank shall be a body corporate with the name aforesaid having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and to contract, and may, by that name, sue and be sued.

(3) The head office of the National Housing Bank shall be at Bombay or at such other place as the Reserve Bank may, by notification, specify.

(4) The National Housing Bank may establish offices, branches or agencies at any place in India, and with the previous approval of the Reserve Bank, at any place outside India.

SECTION 04: CAPITAL

The authorised and paid up capital of the National Housing Bank shall be one hundred crores of rupees and shall be subscribed by the Reserve Bank. Provided that the Central Government may in consultation with the Reserve Bank, by notification, increase the said capital up to five hundred crores of rupees and the capital so increased shall also be subscribed by the Reserve Bank.

SECTION 05: MANAGEMENT

(1) The general superintendence, direction and management of the affairs and business of the National Housing Bank shall vest in the Board of Directors, which shall exercise all powers, and do all. acts and things, which may be exercised or dene by the National Housing Bank.

(2) subject to the provisions of this Act, the Board, in discharging its functions, shall act on business principles with due regard to public interest.

(3) Subject to the provisions of sub-section (1) and save as otherwise provided in the regulations made under this Act,-

(a) the Chairman, if he is holding offices both as the Chairman and the Managing Director, or

(b) the Managing Director, if the Chairman is absent, shall also have powers of general superintendence, direction and management of the affairs and business of the National Housing Bank and may also exercise all powers and do all acts and things which may be exercised or done by the National Housing Bank and shall act on business principles with the due regard to public interest.

(4) The Managing Director shall, in the discharge of his powers and functions, follow such directions as the Chairman may give.

(5) In the discharge of its functions under this Act, the National Housing Bank shall be guided by such directions in matters of policy involving public interest as the Central Government, in consultation with the Reserve Bank, or the Reserve Bank, may give in writing.

SECTION 06: BOARD OF DIRECTORS

(1) The Board of Directors of the National Housing Bank shall consist of the following, namely:-

(a) a Chairman and a Managing Director: Provided that the same person may be appointed as Chairman and as Managing Director;

(b) three directors from amongst the experts in the field of housing, architecture, Engineering, sociology, finance, law management and corporate planning or in any other Field, special knowledge of which is considered useful to the National Housing Bank:

(c) three directors, who shall be persons with experience in the working of institutions involved in providing funds for housing or engaged in housing development:

(d) two directors from out of the directors of the Reserve Bank:

(e) three directors from amongst the official of the Central Government;

(f) two directors from amongst the officials of the State Government.

(2) the Chairman, the Managing Director and other directors excluding the directors referred to in clause (d), shall be appointed by the Central Government in consultation with the Reserve Bank and directors referred to in clause (d) shall be nominated by the Reserve Bank.

SECTION 07: TERMS OF OFFICE OF CHAIRMAN, MANAGING DIRECTOR AND OTHER DIRECTORS, SERVICE CONDITIONS, ETC

(1) The Chairman and the Managing Director shall hold office for such term, not exceeding five years and shall receive such salary and allowances and be governed by such terms and conditions of service as the Central Government may. in consultation with the Reserve Bank. specify and shall be eligible for re-appointment; Provided that the Chairman as the case may be, the Managing Director shall, notwithstanding the expiration of his term, continue to hold office until his successor enters upon his office.

(2) The director referred to in clauses (b) and (c) of sub-section (1) of section 6-shall hold office for a term of three years: Provided that any such director shall, notwithstanding the expiration of his term, continue to hold office until his successor enters upon his office.

(3) The Central Government may. in consultation with the Reserve Bank remove the Chairman or the Managing Director, or any other director referred to in sub-section (2) at any time before the expiry of his terms of office after giving him a reasonable opportunity of showing cause against the proposed removal.

(4) Notwithstanding anything contained in sub-sections ( 1 ) and (3) the Central Government, in consultation with the Reserve Bank, shall have the right to terminate the term of office of the Chairman or, as the case may be, the Managing Director, at any time before the expiry of the term specified under sub-section (1) by giving him notice of not less than three months in writing or three months salary and allowances in lieu thereof and the Chairman or the Managing Director, as the case may be, shall also have the right to relinquish his office at any time before the expiry of the term specified under sub -section (1) by giving to the Central Government notice of not less than three months in writing or three months' salary and allowances in lieu thereof.

(5) The directors shall be paid fees and allowances as may be prescribed for attending the meetings of the Board or of any of its committees and for attending to any other work of the National Housing Bank; Provided that no such fee shall be payable to any director, who is an official of the Government or a director of the Reserve Bank.

SECTION 08: DISQUALIFICATIONS

No person shall be a director of the Board, if he-

(a) is, or becomes of unsound mind and has been so declared by a competent Court; or

(b) is or has been convicted of any offence which, in the opinion of the Central Government, involves moral turpitude, or

(c) is, or at any time has been, adjudicated as insolvent or has suspended payment of his debts or has compounded with his creditors; or

(d) has, for any reason, been removed or dismissed from the service of-

(i) the Government, or

(ii) the Reserve Bank, the State Bank or any other Bank, or

(iii) any public financial institution, or state financial corporation, or

(iv) any other corporation owned or controlled by the Government.

SECTION 09: VACATION AND RESIGNATION OF OFFICE BY DIRECTORS

(1) If a director-

(a) becomes subject to any of the disqualifications mentioned in Section 8-; or

(b) is absent without leave of the Board for three or more consecutive meetings thereof his seat shall thereupon become vacant.

(2) Any director may resign his office by giving notice thereof in writing to the authority that appointed or, as the case may be, nominated him and on the resignation being accepted by such authority or if his resignation is not sooner accepted, on the expiry of three months from the receipt thereof by such appointing authority, he shall be deemed to have vacated his once.

SECTION 10: CASUAL VACANCY IN THE OFFICE OF CHAIRMAN OR MANAGING DIRECTOR

If the Chairman, or as the case may be, the Managing Director, is by infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise, in circumstances not involving the vacation of his appointment, the Central Government may, appoint another person to act in his place during his absence.

SECTION 11: MEETINGS OF BOARD

(1) The Board shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings, as may be prescribed.

(2) The Chairman, or, if for any reason he is unable to attend a meeting of the Board, the Managing Director, or in the event of both the Chairman and the Managing Director being unable to attend a meeting, any other director nominated by the Chairman in this behalf and in the absence of such nomination, any director elected by the directors present from among themselves at the meeting, shall preside at the meeting.

(3) all questions which come up before any meeting of the Board shall be decided by a majority of votes of the directors present and voting, and in the event of an equality of votes, the Chairman, or, in his absence, the person presiding, shall have a second or casting vote.

SECTION 12: EXECUTIVE COMMITTEE AND OTHER COMMITTEES

(1) The Board may constitute an Executive Committee consisting of such number of directors as may be prescribed.

(2) The Executive Committee shall discharge such functions as may be prescribed, or, as may be delegated to it, by the Board.

(3) The Board may constitute such other committees, whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons as it thinks fit for such purposes, as it may decide and any committee so constituted shall discharge such functions as may be delegated to it by the Board.

(4) The Executive Committee or any other committees constituted under this section shall meet at such times and places and shall observe such rules of procedure in regard to transaction of business at its meetings, as may be prescribed.

SECTION 13: DIRECTOR OF BOARD OR MEMBER OF COMMITTEE THEREOF NOT TO PARTICIPATE IN MEETINGS IN CERTAIN CASES

Any director of the Board or any member of a committee, who has any direct or indirect pecuniary interest in any matter coming up for consideration at a meeting of the Board or a committee thereof, shall as soon as possible after relevant circumstances have come to his knowledge disclose the nature of his interest at such meeting and the disclosure shall be recorded in the minutes of the Board, or the committee, as the case may be, and the director or member shall not take any part in any deliberation or decision of the Board or the committee with respect to that matter.

SECTION 14: BUSINESS OF THE NATIONAL HOUSING BANK

Subject to the provisions of this Act, the National Housing Bank may transact all or any of the following kinds of business, namely:-

(a) promoting, establishing, supporting or aiding in the promotion, establishment and support of housing finance institutions;

(b) making of loans and advances or rendering any other form -of financial assistance whatsoever to housing finance institutions and scheduled banks,²[or to any authority established by or under any Central, State or Provincial Act and engaged in slum clearance];

(d) guaranteeing the financial obligations of housing finance institutions and underwriting the issue of stocks, shares, bonds debentures and securities of every other description of housing finance institutions;

(e) drawing, accepting, discounting or rediscounting, buying or selling and dealing in bills of exchange, promissory notes, bonds, debentures, hundies, coupons and other instruments by whatever name called;

(f) forming, promoting and managing subsidiaries for carrying out all or any of its functions under this Act;

(g) undertaking research and surveys on construction techniques and other studies relating to or connected with shelter, housing and human settlement;

(h) formulating one or more schemes, for the purpose of mobilisation of resources and extension of credit for housing;

²(hh) formulating a scheme for the purpose of accepting deposits referred to in clause (a) of Section 2 of the Voluntary Deposits (Immunities and Exemptions) Act, 1991and crediting forty per cent. of the amount of such deposits to a special fund created under section 37-;]

(i) formulating one or more schemes; for the economically weaker sections of society which may be subsidised by the Central Government or any State Government or any other source;

(j) organising training programmes, seminars and symposia on matters relating to housing;

(k) providing guidelines to the housing finance institutions to ensure their growth on sound lines;

(1) providing technical and administrative assistance to housing finance institutions;

(m) coordinating with the Life Insurance Corporation of India, the Unit Trust of India, the General Insurance Coloration of India and other financial institutions, in the discharge of its overall functions;

(n) exercising all powers and functions in the performance of duties entrusted to the National Housing Bank under this Act or under any other law for the time being in force;

(o) acting as agent of the Central Government, the State Government or the Reserve Bank or of any authority as may be authorised by the Reserve Bank;

(p) any other kind of business which the Central Government may on the recommendation of the Reserve Bank, authorise;

(q) generally, doing of all such matters and things as may be incidental to or consequential upon the exercise of its powers of the discharge of its duties under this Act.

SECTION 15: BORROWINGS AND ACCEPTANCE OF DEPOSITS BY NATIONAL HOUSING BANK

(1) The National Housing Bank may, for the purpose of carrying out its functions under this Act-

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