It is difficult to understand the difference between RBI, the National Housing Banks and the Bank Ombudsman so easily. Let’s have a look to get a clear understanding about these topics and understand how they are helpful for us.
National Housing Banks
National housing bank is the financial institution established to operate as a primary agent to promote housing finance. This institution is the wholly owned subsidiary of Reserve Bank of India (RBI) that contributes the entire paid up capital and works at both local and regional level. The surveillance of all Housing Finance Companies through on-site and off-site mechanism, coordination with other regulators is supervised and regularized by National Housing Bank. NHB provides all financial and other incidental support to these financial institutions. The vision of NHB is to develop, promote and expand the stability in housing finance market. The NHB was established to promote and fulfill the housing needs of all segments of the population especially with a strong focus on low and moderate income housing. NHB was established with the following objectives:
- To promote a healthy and cost effective housing finance system to support all the segments of the population and to merge the housing finance system with all financial systems.
- To establish a wide network of dedicated housing finance institutions to serve sufficiently various regions and different income groups.
- Increase the resources and channelize them to increase the growth in housing sector.
- Provide affordable credit for housing.
- Supervise and regularize the activities of housing finance companies derived under the act.
- Encourage to increase the buildable land, the building material and upgrade the housing stock of the country.
- Encourage public agencies to facilitate and supply the land for housing.
The following are the main functions of National Housing Banking our country:
Development & Promotion
There was a time when the banking sector was not willing to finance the housing needs for any significant level. The housing finance institutions were absent at many local and regional level. As a result the shortage of housing was growing at an alarming level throughout the country. It was an urgent need to set up new financial institutions at all levels to supply credit for housing. This is when NHB came into existence that adopted new approaches to cater the different needs of different income group. The above average group can be easily served that raise resources through the open market and give credit with minimum necessary regulations whereas for the below poverty group special elevation programs such as subsidy is given. The middle group that nearly consist half of the total number of households of the country is needed to be taken care of. NHB encourage the financial institutions to lend through refinancing to this section. It is a continuous effort that creates and support new set of special institutions to serve as a dedicated centre.
To regulate is an important function of NHB. This emphasizes more importance to the housing finance system as it combines with debts and capital markets. Regulation ensures the need for stable and credible housing finance system. Being on a developing stage the NHB needs a great amount of stability for resource development, policy development and institution building. NHB set the guidelines to recognize the HFC’s for its financial assistance.
To provide finance is an important function of NHB. The borrowers include the HFC’s and the banks. This involves all the primary lending institutions that fall under various categories to serve as a dedicated outlet for the assistance for housing sector. The housing finance sector is supported by extending refinance to different lenders. This funding is further used for eligible housing loans given to individuals or for the project loans. It also supports the projects under public housing agencies for the construction and development of housing related infrastructures. NHB also monitor the fluctuations in real estate and stock market and acts as a special purpose vehicle for the scrutiny of housing loan. So refinance operations, project finance, guarantee and securitization are the major roles played by NHB.
The reserve bank of India (RBI), under the reserve bank of India Act, uses monetary policies to create financial stability in the country. RBI keeps a strong supervision on the financial sector that includes commercial banks, financial institutions and non banking financial companies. Restructuring the bank inspections, off site surveillance of banks and financial institutions and strengthen role of auditors are the initiatives taken by RBI. The main objective of RBI is to balance the price stability and ensure that the credit flows to the productive economic sector’s growth. The regulation and supervision by RBI in overall financial system increases the public confidence, protects the interest rates and provide positive banking alternatives to the public. The policies, rules and regulations made by RBI has to be followed by all the Banks and other financial institutions. RBI execute multiple functions like monetary policies, currency issuance, foreign exchange management, work as a bank of government and acts as a banker to scheduled commercial banks. RBI ensures to work for the overall development of economic growth of the country.
An ombudsman is an authorized person who is appointed to look into the queries and complaints related to an organization. With an ombudsman a complaint can be resolved out of the court. Bank Ombudsman is a judicial authority that functions under the Banking Ombudsman Scheme and enable the resolution of the complaints of customers related to the services rendered by the banks.
In 1995, the institution of banking ombudsman was introduced through the banking ombudsman scheme. The scheme was implemented by RBI to protect the public interest and the banking policies. The mechanism was introduced to solve the grievances by the customers. This helps to protect the efficient services rendered by the banks and the right of the customers. The ombudsman works as a mediator and investigate the complaint from the customers to bring the solution among the aggrieved parties. There are certain procedures and conditions to be followed to file a complaint before the Banking Ombudsman. The Banking ombudsman also entertains the complaints received by the Central Government or the RBI. If the customer is not satisfied with the results given by the Banking Ombudsman, he can approach the RBI and further with any dissatisfaction he can go to High Court. The powers of banking Ombudsman are wide enough to include the power to judge between inter-bank disputes and bank-customer disputes.