Reserve Bank of India (Mortgage Guarantee Companies) Directions, 2025

RBI/DOR/2025-26/369 DOR.FIN.REC.No.288/23-11-001/2025-26 November 28, 2025 Previous Versions Reserve Bank of India (Mortgage Guarantee Companies) Directions, 2025 (Updated as on March 10, 2026)

Table of Contents Chapter-I – Preliminary Chapter-II – Role of Board, Registration and Permissible Activities Chapter-III – Prudential Regulations Chapter-IV – Corporate Governance Chapter-V - Miscellaneous instructions Chapter-VIII – Repeal and Other Provisions

In exercise of the powers conferred under section 45JA of Reserve Bank of India Act, 1934 (Act 2 of 1934), and of all powers enabling it in this behalf, the Reserve Bank having considered it necessary in the public interest and being satisfied that, for the purpose of enabling it to regulate the financial system to the advantage of the country and to prevent the affairs of any Mortgage Guarantee Company (MGC) from being conducted in a manner detrimental to the interest of investors or in any manner prejudicial to the interest of such MGCs, hereby issues the Reserve Bank of India (Mortgage Guarantee Companies) Directions, 2025, hereinafter specified.

Chapter-I – Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Mortgage Guarantee Companies) Directions, 2025.
2. These directions shall come into effect on the day they are placed on the website of the Reserve Bank.

B. Applicability

3. These Directions shall be applicable to Mortgage Guarantee Companies (hereinafter collectively referred to as ‘MGCs’ and individually as a ‘MGC’) which has been granted Certificate of Registration under the scheme of Registration of Mortgage Guarantee Companies by the Reserve Bank of India.

C. Applicability of other Directions

4. The provisions specified in the following Directions, where not contradictory to the contents of these Directions, shall be applicable to MGCs based on the layer in which the MGC is categorised:

• (1) Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025.
• (2) Paragraph 6(4), 7, 8, 11, 15, 16, and 54 of Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025.
• (3) Paragraph 86 to 100 of Reserve Bank of India (Non-Banking Financial Companies – Resolution of Stressed Assets) Directions, 2025.
• (4) Reserve Bank of India (Non-Banking Financial Companies – Financial Statements: Presentation and Disclosures) Directions, 2025 except provisions contained in paragraph 20.
• (5) Paragraph 6, 7, 14, 15, 25 and 26 of Reserve Bank of India (Non-Banking Financial Companies – Miscellaneous) Directions, 2025.
• (6) Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Directions, 2025.

Note: For ample clarity, it is clarified that the instructions contained in these Directions shall prevail in the event of conflict, if any, with the above mentioned Directions.

• (7) Chapter IV of Reserve Bank of India (Non-Banking Financial Companies – Concentration Risk Management) Directions, 2025.
• (8) Paragraph 7 to 9, Paragraph 16 to 18, Paragraph 25 to 39, and paragraph 41 to 43 of Reserve Bank of India (Non-Banking Financial Companies – Governance) Directions, 2025.
• (9) Chapter IV and IT-specific provisions contained in Chapter II of Reserve Bank of India (Non-Banking Financial Companies – Managing Risks in Outsourcing) Directions, 2025.
• (10) Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Declaration of Dividends) Directions, 2025.
• (11) Reserve Bank of India (Non-Banking Financial Companies – Know Your Customer) Directions, 2025
• (12) Reserve Bank of India (Non-Banking Financial Companies - Voluntary Amalgamation) Directions, 2025.

5. Notwithstanding the above, the instructions contained in these Directions shall be applicable to MGCs in addition and not in substitution to the other relevant instructions contained in the Directions mentioned in paragraph 4 above.
6. A MGC may make use of the ‘Guidance Note on Operational Risk Management and Operational Resilience’, as amended from time to time.

D. Regulatory Structure under SBR and applicability of Regulations under SBR

7. A MGC may lie in any of the layers of the regulatory structure depending on the parameters of the scale based regulatory framework specified in paragraph 8 to 36 of Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025.

E. Definitions

8. In this Chapter, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:

• (1) ‘bank’ means – * a banking company; or * a corresponding new bank; or * the State Bank of India; or * a subsidiary bank; or * such other bank which the Reserve Bank may, by notification, specify for the purposes of these guidelines; and * a co-operative bank as defined under the Banking Regulation Act, 1949 (Act 10 of 1949);
• (2) ‘banking company’ means a banking company as defined in Section 5(c) of the Banking Regulation Act, 1949 (Act 10 of 1949);
• (3) ‘borrower’ means any person or any entity who has been granted a housing loan by any creditor institution or any other entity which may be specified by Reserve Bank of India from time to time;
• (4) ‘breakup value’ means the equity capital and reserves as reduced by intangible assets and revaluation reserves, divided by the number of equity shares of the investee company;
• (5) ‘carrying cost’ means book value of the assets and interest accrued thereon but not received;
• (6) ‘company’ means a company registered under Section 3 of the Companies Act, 1956 or a corresponding provision under Companies Act, 2013;
• (7) ‘corresponding new bank’ means as defined in clause (da) of Section 5 of the Banking Regulation Act, 1949;
• (8) ‘creditor institution’ means a bank or housing finance company;
• (9) ‘default’ means non-payment on the due date of any principal debt or interest thereon payable by a borrower to any creditor institution;
• (10) ‘doubtful asset’ means an asset which remains a sub-standard asset for a period exceeding 12 months;
• (11) ‘earning value’ means the value of an equity share computed by taking the average of profits after tax as reduced by the preference dividend and adjusted for extra-ordinary and non-recurring items, for the immediately preceding three years and further divided by the number of equity shares of the investee company and capitalised at the following rate : * in case of predominantly manufacturing company, eight per cent; * in case of predominantly trading company, ten per cent; and * in case of any other company, including a non-banking financial company, twelve per cent;

Note: If an investee company is a loss making company, the earning value will be taken at zero;

• (12) ‘fair value’ means the mean of the earning value and the breakup value;
• (13) ‘guarantee’ means a contract of guarantee as defined in section 126 of the Indian Contract Act, 1872 (9 of 1872);
• (14) ‘housing finance company’ means housing finance company as defined in Reserve Bank of India (Housing Finance Companies) Directions, 2025;
• (15) ‘housing loan’ means any loan or advance granted to an individual or any other entity which may be specified by Reserve Bank from time to time for the purpose of construction/ repairs/ upgradation of a house or residential property or acquisition of a house or residential property or both, i.e., house and residential property;

Explanation: - 'Other entities' would include housing societies and housing co-operatives in the above definition of ‘housing loan’.

• (16) ‘hybrid debt capital instrument’ shall have the same meaning as defined in the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025;
• (17) ‘loss asset’ means: * an asset which has been identified as loss asset by the mortgage guarantee company or its internal or external auditor or by the Reserve Bank, to the extent it is not written off by the mortgage guarantee company; and * an asset which is adversely affected by a potential threat of non-recoverability for reasons like erosion in the value of security or non-availability of security or due to any fraudulent act or omission on the part of the borrower, etc.;
• (18) ‘mortgage guarantee’ means a guarantee provided by a mortgage guarantee company for the repayment of an outstanding housing loan and interest accrued thereon up to the guaranteed amount to a creditor institution, on the occurrence of a trigger event;
• (19) ‘mortgage guarantee company (MGC)’ means a company registered with the Reserve Bank as mortgage guarantee company which primarily transacts the business of providing mortgage guarantee;
• (20) ‘mortgage guarantee contract’ means a tri-partite contract among the borrower, the creditor institution and the mortgage guarantee company, which provides the mortgage guarantee;
• (21) ‘National Housing Bank’ means the National Housing Bank established under the National Housing Bank Act, 1987 (53 of 1987);
• (22) ‘'net owned fund' means:
• (i) the aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the company after deducting there from -
• (a) accumulated balance of loss;
• (b) deferred revenue expenditure; and
• (c) other intangible assets; and
• (ii) further reduced by the amounts representing -
• (a) investments of such company in shares of - ‒ its subsidiaries; ‒ companies in the same group; ‒ all other non-banking financial companies; and
• (b) the book value of debentures, bonds, outstanding loans and advances (including hire purchase and lease finance) made to, and deposits with - ‒ subsidiaries of such company; and ‒ companies in the same group, to the extent such amount exceeds ten per cent, of (i) above.
• (iii) ‘subsidiaries’ and ‘companies in the same group’ shall have the same meanings assigned to them in the Companies Act, 1956 or a corresponding provision under Companies Act, 2013.
• (23) ‘non-performing asset’ (NPA) means account of a borrower, which has been classified by a creditor institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classification issued by the Reserve Bank. Further, NPA in respect of mortgage guarantee asset means, an asset acquired from the credit institution on the happening of trigger event which is straight away classified as non-performing asset and shall thereafter be classified according to the age of NPA. For the purpose of income recognition on investments by mortgage guarantee companies, ‘non-performing asset’ means an asset, in respect of which, interest or principal or amortization obligations have remained overdue for a period of more than 90 days.
• (24) ‘net asset value’ means the latest declared net asset value by the mutual fund concerned in respect of that particular scheme;
• (25) 1[‘owned fund’ means paid up equity capital, free reserves including quarterly profits, contingency reserves maintained as per paragraphs 43 to 50 of these Directions, balance in share premium account, and capital reserves representing surplus arising out of sale proceeds of asset, excluding reserves created by revaluation of asset, as reduced by accumulated loss balance, book value of intangible assets and deferred revenue expenditure, if any; Inclusion of quarterly profits shall be subject to the following conditions:
• (i) The financial statements shall be subjected to limited review / audit on a quarterly basis by the statutory auditors.
• (ii) Such profits shall be reduced by average dividend paid in the last three years and the amount which can be reckoned for inclusion would be arrived at as under: $EP_t = NP_t - 0.25 * D * t$ Where: $EP_t$ = Eligible profit up to quarter ‘t’ of the current financial year, t varies from 1 to 4 $NP_t$ = Net profit up to quarter ‘t’ D = average dividend paid for / pertaining to the last three financial years Losses in the current year shall be fully deducted from Owned Fund. A MGC shall not be required to deduct a Right-of-Use (ROU) asset (created in terms of Ind AS 116-Leases) from Owned Fund, provided the underlying asset being taken on lease is a tangible asset.]
• (26) ‘Reserve Bank’ means the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934 (2 of 1934)
• (27) ‘standard asset’ means the asset in respect of which, no default in repayment of principal or payment of interest is perceived and which does not disclose any problem nor carry more than normal risk attached to the business;
• (28) ‘sub-standard asset in respect of mortgage guarantee asset’ means an asset which has been classified as NPA for a period not exceeding 12 months;
• (29) ‘subordinated debt’ means ‘subordinated debt‘ as defined in Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025.