It may be recalled that while announcing proposals for the Union budget 2007-08, the Finance Minister of India announced:

'Our people want housing loans. Banks and housing finance companies that lend against mortgages would have greater comfort if the mortgage can be guaranteed through a three way contract among borrower, lender and guarantor. Regulations will be put in place to allow the creation of mortgage guarantee companies'.

2. Accordingly, the Bank had drawn up a draft scheme for considering proposals from Mortgage Guarantee Company for grant of Certificate of Registration. The draft scheme was discussed with the stakeholders and after examination of comments/suggestions received in this regard and with the previous approval of the Central Government, it has been decided to specify Mortgage Guarantee Company as non-banking financial company in terms of powers conferred upon the Bank under Section 45 I (f) (iii) of the RBI Act, 1934. A Notification No. DNBS(MGC) 1/CGM (PK)- 2008 dated January 15, 2008 is enclosed in this regard. Further, it has been decided to exempt a Mortgage Guarantee Company from the provisions of Section 45-IA (requirement of registration), Section 45-IB (maintenance of liquid assets) and Section 45-IC (creation and transfer to Reserve Fund a certain percentage of the net profit) of the RBI Act as a separate regulatory framework is being prescribed for such companies. A Notification No.DNBS(MGC) 2/CGM (PK)- 2008 dated January 15, 2008 in this regard is enclosed.

Yours faithfully,

(P Krishnamurthy)
Chief General Manager In-charge