Notification DNBS(PD)MGC No.3 /CGM (PK) - 2008 dated February 15, 2008
Guidelines
on Registration and Operations of Mortgage Guarantee Company under Section 45L(1)(b)
of the Reserve Bank of India Act, 1934
The Reserve
Bank of India, in terms of Notification No. DNBS. (MGC) 1 /CGM (PK)- 2008 dated
January 15, 2008, issued in terms of Section 45I(f)(iii) of the Reserve Bank of
India Act, 1934 (2 of 1934) and on being satisfied that it is necessary so to
do in exercise of the powers conferred under Section 45 L(1)(b) of the said Act,
1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby issues
these guidelines for compliance of the same by every non-banking financial company
undertaking the business of Mortgage Guarantee as defined herein.
1.
Short title, commencement and applicability of the directions:
(i)
These guidelines shall be known as the 'Mortgage Guarantee Company (Reserve Bank)
Guidelines, 2008'.
(ii) These guidelines shall come into force with immediate
effect.
Scope
(iii) These
guidelines provide a framework for the registration and operation of mortgage
guarantee companies in India.
Definitions
2. (1) In these guidelines unless the context otherwise
requires,
(a) 'bank' means-
(i) a
banking company; or
(ii) a corresponding new bank; or
(iii) the
State Bank of India; or
(iv) a subsidiary bank; or
(v) such other
bank which the Reserve Bank may, by notification, specify for the purposes of
these guidelines; and
(vi) a cooperative bank as defined under the Banking
Regulation Act, 1949 (10 of 1949);
(b) 'banking company'
means a banking company as defined in Section 5(c) of the Banking Regulation Act,
1949 (10 of 1949);
(c) '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;
(d) "creditor institution" means a bank or housing
finance company;
(e) 'company' means a company registered
under Section 3 of the Companies Act, 1956;
(f) 'corresponding
new bank' means as defined in clause (da) of Section 5 of the Banking Regulation
Act, 1949;
(g) 'default' means non-payment on the due date
of any principal debt or interest thereon payable by a borrower to any creditor
institution ;
(h) 'guarantee' means a contract of guarantee
as defined in the Indian Contract Act, 1872 (9 of 1872);
(i)
'housing finance company' means a company which primarily transacts or has as
one of its principal objects, the transacting of the business of providing finance
for housing, as defined in the National Housing Bank Act, 1987;
(j)
'housing loan' means any loan or advance granted to an individual or any other
entity which may be specified by Reserve Bank of India 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'.
(k)
'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;
(l) 'mortgage guarantee company' means a
company which primarily transacts the business of providing mortgage guarantee;
(m) "mortgage guarantee contract" means a tri-partite contract among
the borrower, the creditor institution and the mortgage guarantee company, which
provides the mortgage guarantee;
(n) 'National Housing Bank'
means the National Housing Bank established under the National Housing Bank Act,
1987 (53 of 1987);
(o) "net owned fund" is as
notified in the Prudential Norms for Mortgage Guarantee Companies;
(p)
'non-performing asset' 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 or the National Housing Bank as the case may be;
(q)
'Reserve Bank' means the Reserve Bank of India constituted under the Reserve Bank
of India Act, 1934 (2 of 1934);
(r) 'substantial interest'
means holding of a beneficial interest by an individual or his spouse or minor
child, whether singly or taken together in the shares of a company, the amount
paid up on which exceeds ten percent of the paid up capital of the company; or
the capital subscribed by all partners of a partnership firm;
(s)
"trigger event" means classification of the account of a borrower as
non-performing asset in the books of the creditor institution;
(t) ‘turnover
or business turnover’ means the total mortgage guarantee contracts entered during
the year together with the volume of business arising out of other activities
(specially permitted by RBI), undertaken during the year;
2.
(2) Words or expressions used but not defined herein and defined in the Companies
Act, 1956 (1 of 1956) or Accounting Standards issued by the Chartered Accountants
of India, shall have the same meaning as assigned to them in that Act / Accounting
standards.
Registration with the Reserve Bank of India
3. A mortgage guarantee company shall commence the business
of providing mortgage guarantee after -
(a) obtaining a
certificate of registration from the Reserve Bank of India; and
(b)
having a net owned fund of one hundred crore rupees or such other higher amount,
as the Reserve Bank of India may, by notification, specify.
4.
Every mortgage guarantee company shall make an application for registration to
the Reserve Bank of India in such form as may be specified by the Reserve Bank
of India for the purpose.
5. The Reserve Bank of India,
for the purpose of considering the application for registration, shall require
to be satisfied that the following conditions are fulfilled:-
(a)
that the mortgage guarantee company shall primarily transact the business of providing
mortgage guarantee. A mortgage guarantee company shall be deemed to comply with
the above when at least 90% of the business turnover is mortgage guarantee business
or at least 90% of the gross income is from mortgage guarantee business (which
includes the income derived from reinvesting the income generated from mortgage
guarantee business);
(b) that the mortgage guarantee company
is or shall be in a position to pay its liabilities arising from the contracts
of guarantee it may enter into;
(c) that the mortgage guarantee
company has adequate capital structure as stipulated in paragraphs 11 to 13 below
and adequate earning prospects from mortgage guarantee business;
(d)
that the general character of the management or the proposed management of the
mortgage guarantee company shall not be prejudicial to the public interest;
(e)
that the Board of Directors of such mortgage guarantee company does not consist
of more than half of its total number of directors who are either nominees of
any shareholder with substantial interest or associated in any manner with the
shareholder with substantial interest or any of the subsidiaries of the shareholder
with substantial interest if such a shareholder is a company;
(f)
(i) Mortgage guarantee company shall have a well diversified shareholding;
(ii) Mortgage guarantee company shall not be a subsidiary
of any other company including a company registered or incorporated under any
law in force outside India;
(iii) No individual, association
or body of individuals whether incorporated or not, partnership firm, company
or company registered or incorporated under any law in force outside India shall,
directly or indirectly, have any controlling interest in mortgage guarantee company;"
(g)
the Foreign Direct Investment to be eligible for investment in the equity of a
mortgage guarantee company should have prior approval of FIPB. If the foreign
entity which has received FIPB / FED approval is having substantial interest in
the applicant mortgage guarantee company, it should be regulated by a home country
financial regulator and should itself preferably be a mortgage guarantee company
and have a good track record of operating as a mortgage guarantee company. However,
the above clauses would not be applicable if the investor in the equity of a mortgage
guarantee company is international financial institution;
(h)
that the public interest shall be served by the grant of certificate of registration
to the mortgage guarantee company to commence or to carry on the business in India;
(i)
that the grant of certificate of registration shall not be prejudicial to the
operation and growth of the housing finance sector of the country;
(j)
that the mortgage guarantee company is compliant with the applicable norms for
foreign investment in such companies; and
(k) any other
condition, fulfillment of which in the opinion of the Reserve Bank of India, shall
be necessary to ensure that the commencement of or carrying on the business in
India by a mortgage guarantee company shall not be prejudicial to the public interest
and the housing finance sector in India.
6. The Reserve
Bank of India may, after being satisfied that the conditions specified in sub
paragraphs of paragraph 5 are fulfilled, grant a certificate of registration subject
to such conditions which it may consider, fit to impose.
7.
The mortgage guarantee company shall be under the regulatory and supervisory jurisdiction
of the Reserve Bank of India.
8. The Reserve Bank of India
may cancel a certificate of registration granted to a mortgage guarantee company,
if such company-
(a) ceases to carry on the business of
providing mortgage guarantee in India; or
(b) has failed to comply with any
condition subject to which the certificate of registration has been issued to
it; or
(c) has failed to honour, in a timely manner, the claims arising from
the contract of guarantee it has entered into or may enter into; or
(d) at
any time fails to fulfill any of the conditions referred to in paragraphs 5 and
6; or
(e) fails to -
i) comply with any direction issued
by the Reserve Bank of India; or
ii) maintain accounts, publish and disclose
its financial position in accordance with the requirements of any law or any direction
or order issued by the Reserve Bank of India; or
iii) submit or offer for inspection
its books of account or other relevant documents when so demanded by the Reserve
Bank of India.
Essential features of a mortgage
guarantee
9. The essential features of a mortgage guarantee
contract shall be as follows:
(a) it shall be a contract
of guarantee under Section 126 of the Indian Contract Act, 1872;
(b)
the mortgage guarantee contract shall be unconditional and irrevocable and the
guarantee obtained shall be free from coercion, undue influence, fraud, misrepresentation,
and/or mistake under Indian Contract Act, 1872 ;
(c) it
shall guarantee the repayment of the principal and interest outstanding in the
housing loan account of the borrower, up to the amount of guarantee;
(d)
the guarantor shall pay the guaranteed amount on invocation without any adjustment
against the realisable value of the mortgage property;
(e)
it shall be a tri-partite contract among the borrower, the creditor institution
and the mortgage guarantee company, which provides the mortgage guarantee.
10.
The mortgage guarantee company shall not carry on insurance business.
Minimum
Capital requirement
11. A mortgage guarantee
company shall have a minimum net owned fund of Rs.100 crore at the time of commencement
of business, which shall be reviewed for enhancement after 3 years.
Capital Adequacy
12. A mortgage
guarantee company shall maintain a capital adequacy ratio of ten percent (10%)
of its aggregate risk weighted assets of on balance sheet and of risk adjusted
value of off-balance sheet items or any other percentage that may be prescribed
by the Reserve Bank of India for the purpose, from time to time.
13.
A mortgage guarantee company shall maintain at least six percent (6%) of its aggregate
risk weighted assets of on balance sheet and of risk adjusted value of off-balance
sheet items as Tier I capital.
Prudential and
accounting norms
14. The mortgage guarantee
company shall be required to comply with various prudential guidelines including
those relating to income recognition, asset classification, provisioning, classification
and valuation of investments and prudential exposures that are issued by the Reserve
Bank of India from time to time.
15. The mortgage guarantee
company shall also comply with all the relevant Accounting Standards and Guidance
Notes issued by the Institute of Chartered Accountants of India from time to time.
16.
No single guarantee shall exceed 10% of the company's Tier I and Tier II capital.
Funding
options
17. (1) Acceptance of public deposits
- Mortgage guarantee companies shall not accept public deposits.
17.
(2) External Commercial Borrowings - Mortgage guarantee companies shall
not avail External Commercial Borrowings.
Creation
and maintenance of Reserves
Contingency Reserves:
18. A mortgage guarantee company shall create and maintain
a "Contingency Reserve" on an ongoing basis. The mortgage guarantee
company:
(a) Shall appropriate each year at least forty
percent (40%) of the premium or fee earned during that accounting year or twenty
five percent (25%) of the profit (after provisions and tax), whichever is higher,
to the Contingency Reserve;
(b) In case of inadequate profits,
such appropriation shall either result in or increase the amount of carry forward
loss;
(c) May appropriate a lower percentage of the premium
or fee earned during any accounting year when the provisions made each year towards
losses on account of settlement of mortgage guarantee claims exceeds thirty-five
percent (35%) of the premium or fee earned during that accounting year;
(d)
Shall ensure that the Contingency Reserve is built up to at least five percent
(5%) of the total outstanding mortgage guarantee commitments;
(e)
Shall retain the amounts appropriated each year to the Contingency Reserve for
a minimum period of seven (7) subsequent years which shall be eligible for reversal
only in the eighth year subject to the condition in 18(d) above;
(f)
Shall utilize the Contingency Reserve only with the prior approval of the Reserve
Bank of India;
(g) Shall show the amount of ‘Contingency
Reserve’ as a separate line item on the liability side of the balance sheet; however,
Contingency Reserve may be treated as 'free reserve' for the purpose of net owned
fund.
Accounting of Unearned Premium
19.
A mortgage guarantee company shall account the premium or fee on the mortgage
guarantee contracts as an income in the profit and loss account in accordance
with the Accounting Standards issued by the Institute of Chartered Accountants
of India. The amount of unearned premium shall be shown as a separate line on
the liability side of the balance sheet.
Provision for
losses on invoked guarantees
20. A mortgage
guarantee company is exposed to a potential loss when its guarantee is invoked.
Mortgage guarantee companies shall hold provisions for losses in respect of such
invoked guarantees pending recovery of assets. The amount of provisions required
to be held shall be equal to the contract-wise aggregate of ‘amount of invocation’
after adjusting the realisable value of the assets held by the company in respect
of each housing loan where the guarantee has been invoked. In case the realisable
value of the assets held in respect of any invoked guarantee is more than the
amount of invocation, the excess shall not be adjusted against the shortfall in
other invoked guarantees. In case the amount of provisions already held is in
excess of the amount as computed above, the excess shall not be reversed. The
amount of provisions made each year shall be shown as a separate line item in
the Profit and Loss Account. The amount of provision held for losses on settlement
of invoked guarantees shall be shown as a separate line item on the liability
side of the balance sheet.
Provision for ‘Incurred But-Not-Reported
(IBNR) losses’
21. A mortgage guarantee company is
exposed to a potential loss when there is a default in a housing loan guaranteed
by it. Mortgage guarantee companies shall hold provisions in respect of such defaulted
housing loans where the trigger event is yet to occur or the guarantee is yet
to be invoked. The potential loss to which the guarantee company is exposed to
is referred to as ‘Incurred-But-Not-Reported (IBNR) losses’. The amount of provisions
required to be held shall be arrived at on an actuarial basis depending upon the
estimates of loss frequency and loss severity for incurred but not reported losses
which are derived from historic data, trends, economic factors and other statistical
data in relation to paid claims, the provisions held for claims settled, risk
statistics, etc. In case the amount of provisions already held is in excess of
the amount as computed above, the excess shall not be reversed. The amount of
provisions made each year shall be shown as a separate line item in the Profit
and Loss Account. The amount of provision held for Incurred But-Not-Reported (IBNR)
losses shall be shown as a separate line item on the liability side of the balance
sheet.
Requirement of maintaining Register of guarantees
22. Every mortgage guarantee company shall keep one or
more registers in which shall be entered the particulars of guarantee provided
by the company, namely,
(a) name and address of the borrower/co-borrower,
(b)
date and amount of loan sanctioned to the borrower,
(c) brief description of
the property including the site/location of the property,
(d) the nature of
security available for the loan,
(e) tenure of the loan,
(f) amount of each
installment and due date for the payment of each installment,
(g) name and
address of the bank or housing finance company to whom the guarantee has been
provided,
(h) date and amount of the guarantee, and
(i) duration of the
guarantee.
Mortgage guarantee company's obligations
23. The liability of the mortgage guarantee company in
respect of a secured housing loan granted by a creditor institution where the
mortgage guarantee company has provided a guarantee shall be as stipulated in
the contract of guarantee entered into by and between the mortgage guarantee company,
the creditor institution and the borrower.
24. On any day
after a trigger event, the creditor institution, which has obtained a mortgage
guarantee from a mortgage guarantee company, shall be entitled to invoke the guarantee
against the mortgage guarantee company.
25. The mortgage
guarantee company shall make good the guarantee liability without demur as and
when a notice of demand for the payment of the guarantee liability in respect
of the mortgage guarantee provided by it in favour of a bank or a housing finance
company is received by it.
26. If a housing loan turns into
a non-performing asset and the creditor institution prefers first to realize the
loan by resorting to speedy recovery procedures prescribed in the Securitisation
and Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 and the creditor institution, realizes some amount of the loan from the borrower,
the liability of the mortgage guarantee company in respect of the loan, will stand
reduced to that extent.
27. No mortgage guarantee company
shall provide mortgage guarantee for a housing loan with 90% and above LTV ratio.
Due diligence to be exercised by a mortgage guarantee company
28. Before offering to provide a guarantee for the repayment
of a housing loan, the mortgage guarantee company shall be required to be satisfied,
amongst others, with the following;
(a) that the loans are
secured by a valid mortgage;
(b) that the creditor institution
has verified title to the property, marketability of the property and credit worthiness
of the borrower;
(c) that the creditor institution has verified
the use of the land on which a house or residential property is constructed or
proposed to be constructed out of the loan obtained from it;
(d)
that the creditor institution has verified and obtained a copy of the permission
obtained by the borrower from the proper authorities for the purpose of construction
of the house or residential property; and
(e) that the loan
granted by a creditor institution to a borrower is not more than 90% of the value
of the property.
Prohibitions
29.(1)
A housing loan which is not secured by a valid mortgage of the house / residential
property that is or is proposed to be acquired by such loan shall not be eligible
for a mortgage guarantee from a mortgage guarantee company.
No
commissions, rebates or inducements
29.(2)
A mortgage guarantee company shall not pay commissions, rebates, or other inducements
for referral of mortgage guarantee business to any person.
Prohibition
on guaranteeing mortgage originations of Related Party
29.(3)
A mortgage guarantee company shall not provide guarantees on mortgage originations
of promoters, its / their subsidiaries, associates and related parties or subsidiaries,
associates and related parties of mortgage guarantee company including companies
where the mortgage guarantee company has a material investment or interest of
five percent (5%) or more of the shareholding.
Investments
29.(4) A mortgage guarantee company shall not
invest in notes or other evidences of indebtedness secured by a mortgage or other
lien upon real property. This section shall not apply to obligations secured by
real property, or contracts for the sale of real property, which obligations or
contracts of sale are acquired in the course of the good faith settlement of claims
under policies issued by the mortgage guarantee company, or in good faith disposition
of real property so acquired.
Constitution of Audit Committee
30. A mortgage guarantee company shall constitute an Audit
Committee consisting of not less than three non-executive Directors of the Board
of the company, at least one of whom will be a Chartered Accountant.
Policy
for grant of guarantee
31. The Board of Directors
of a mortgage guarantee company shall frame a policy for the company for providing
mortgage guarantee to creditor institutions. Such policy shall, inter alia, stipulate
the following:-
(a) the fee or premium chargeable for providing
a mortgage guarantee based on specific identified criteria including the quantum
of loan; LTV ratio; credit quality of the borrower; and credit appraisal / credit
risk management skills of the bank or housing finance company,
(b)
delegation of power for providing a mortgage guarantee and to enter into a contract
of guarantee,
(c) delegation of power for taking a decision
to make good the claims received from banks and housing finance companies, and
(d)
delegation of power for initiating proceedings for the recovery of its dues from
the borrowers.
Scheme of Mortgage Guarantee
32. For the purpose of providing mortgage guarantee, the
mortgage guarantee company shall prepare a detailed scheme duly approved by its
Board of Directors. The scheme shall contain, amongst others, the following matters:
(a)
the quality of a housing loan,
(b) the maximum portion of
a housing loan granted by a bank or a housing finance company to a borrower, that
may be covered under the contract of guarantee,
(c) the
minimum and the maximum LTV ratio of a housing loan proposed to be covered under
the contract of guarantee,
(d) the fee or premium or charge
indicating the manner for the payment there of, payable by a borrower to the mortgage
guarantee company in consideration for the contract of guarantee,
(e)
the liability of the mortgage guarantee company as to whether the liability will
be co-extensive with that of the borrower or otherwise, and
(f)
the conditions governing the issue as to which party of the mortgage guarantee
company or a bank/ housing finance company will be required to effect recoveries
from the borrower after the mortgage guarantee is invoked and the guarantee liability
is made good by the mortgage guarantee company to the bank or housing finance
company.
Counter-guarantee
33.
Whenever a mortgage guarantee company obtains counter-guarantee cover in respect
of the housing loans guaranteed by it from another mortgage guarantee company,
the mortgage guarantee company and the counter-guarantee company shall establish
and maintain the reserves required for a mortgage guarantee company in India in
appropriate proportions in relation to the risk retained by the original mortgage
guarantee company and ceded to the assuming counter-guarantee company so that
the total reserves established shall not be less than the reserves required under
Indian law for a mortgage guarantee company. In case the counter-guarantee company
is not regulated by the regulator(s) in India, the mortgage guarantee company
guaranteeing the claim shall hold relevant reserves and provisions in respect
of all outstanding mortgage guarantee contracts issued by it.
Exemptions
34. The Reserve Bank of India may, if it considers necessary
for avoiding any hardship or for any other just and sufficient reason, grant extension
of time to comply with or exempt any mortgage guarantee company or class of mortgage
guarantee companies or all mortgage guarantee companies, from all or any of the
provisions of these guidelines either generally or for any specified period, subject
to such conditions as the Reserve Bank of India may impose.
35.
The Reserve Bank of India can give any clarification in respect of the above guidelines
and such clarification shall be treated as part of these guidelines. The guidelines
can be amended by the Bank from time to time.
(P. Krishnamurthy)
Chief General Manager-in-Charge
RESERVE
BANK OF INDIA
DEPARTMENT OF NON-BANKING SUPERVISION
CENTRAL OFFICE
CENTRE
I, WORLD TRADE CENTRE
CUFFE PARADE, COLABA
MUMBAI 400
005
Notification
DNBS(PD)MGC No.5 /CGM (PK) - 2008 dated February 15, 2008
The
Reserve Bank of India, having considered it necessary in the public interest,
and being satisfied that, for the purpose of enabling the Bank to regulate the
credit system to the advantage of the country, it is necessary to issue the directions
relating to the prudential norms as set out below, in exercise of the powers conferred
by Section 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all
the powers enabling it in this behalf, gives to every Mortgage Guarantee Company
the directions hereinafter specified.
Short title, commencement and
applicability of the directions:
1. (i) These
directions shall be known as the 'Mortgage Guarantee Companies Investment
(Reserve Bank) Directions, 2008'.
(ii) These directions
shall come into force with immediate effect.
(iii) The provisions
of these directions shall apply to every Mortgage Guarantee Company which
has been granted Certificate of Registration by the Reserve Bank of India.
Definitions
2. (1) For the purpose of these directions, unless the
context otherwise requires:
(i) "break up 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;
(ii)
"carrying cost" means book value of the assets and interest accrued
thereon but not received;
(iii) "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:
(a) in case of predominantly manufacturing
company, eight per cent;
(b) in case of predominantly trading company, ten
per cent; and
(c) 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;
(iv) "fair value" means the mean of the earning value and the break
up value;
(v)"Mortgage Guarantee Company" means
a company registered with the Bank as mortgage guarantee company as defined in
"Mortgage Guarantee Companies Prudential Norms (Reserve Bank) Directions,
2008;
(vi) "net asset value" means the
latest declared net asset value by the mutual fund concerned in respect of that
particular scheme;
(vii) ‘non-performing asset’ (NPA) for
the purpose of income recognition on investments by mortgage guarantee companies
means an asset, in respect of which, interest or principal or amortization obligations
have remained overdue for a period of 90 days or more.
(2)
Other words or expressions used but not defined herein and defined in the Reserve
Bank of India Act, 1934 (2 of 1934) or Mortgage Guarantee Company Prudential Norms
(Reserve Bank) Guidelines, 2008 contained in Prudential Norms (MGC) No. DNBS.(PD)
MGC 4 /CGM (PK) - 2008 dated February 15, 2008, shall have the same meaning as
assigned to them under that Act or that Directions. Any other words or expressions
not defined in that Act or that Directions, shall have the same meaning assigned
to them in the Companies Act, 1956 (1 of 1956).
Investment
Policy for Mortgage Guarantee Companies
3. (i) A mortgage
guarantee company shall invest only in the following instruments:
a)
Government Securities;
b) Securities of corporate bodies / public sector undertakings
guaranteed by Government;
c) Fixed Deposit/Certificate of Deposits/bonds of
Scheduled Commercial banks/PFIs;
d) listed and rated debentures/bonds of corporates;
e)
fully debt oriented Mutual Fund Units;
f) unquoted Government securities and
Government guaranteed bonds.
(ii)No other investment including
investment in subsidiaries and joint ventures would be permitted. However, a mortgage
guarantee company may hold investments in equity shares of any company which may
be quoted or unquoted or other unquoted investments acquired in satisfaction of
its debts which shall be disposed of by the mortgage guarantee company within
a period of three years or within such period as extended by the Bank, from the
date of such acquisition.
Pattern of Investment
4.
(i) A mortgage guarantee company shall hold not less than 25% of its total investment
portfolio in Central and State Government securities.
(ii)
The remaining investments may be invested as the Board considers prudent, but
with a ceiling of 25% in any one category i.e. listed and rated corporate bonds
and debentures or debt oriented mutual fund units, etc.