AML Laws and Regulations for Housing Finance Companies in India

Last Updated on: 4th August 2026 | Last Reviewed on: 4th August 2026

Key takeaways at a glance

Who is covered: housing finance companies, that is, companies whose principal business is housing finance, as reporting entities under the PMLA and subject to RBI directions and supervision.
Why they are caught: a housing finance company falls within the financial institution definition in section 2(1)(l) of the PMLA, so it is a reporting entity under section 2(1)(wa). No separate designation is needed.
Governing laws: the PMLA, 2002 and the PML (Maintenance of Records) Rules, 2005; the RBI (Housing Finance Companies) Directions, 2025 read with the RBI NBFC KYC Directions, 2025; the UAPA 1967 (Section 51A) and the WMD Act, 2005 (Section 12A).
Supervisor: the Reserve Bank of India (RBI), which has regulated housing finance companies since 2019, read with the National Housing Bank Act, 1987. Reports go to the Financial Intelligence Unit – India (FIU-IND); the Enforcement Directorate (ED) enforces the PMLA.
Core duties: an internal risk assessment, customer due diligence and KYC, beneficial owner identification, periodic update, monitoring, prescribed transaction reporting, five year record-keeping and sanctions screening.

This guide is general information on Indian law, not legal advice. For your company’s specific position, speak to a qualified AML professional.

Housing Finance Companies are categorised as reporting entities under the Prevention of Money Laundering Act, 2002, and are a specialised category of non banking financial company. A housing finance company engages in the principal business of providing finance for housing, whether to individual homebuyers or to developers.

Their AML, CFT, and CPF obligations flow from PMLA, the PML (Maintenance of Records) Rules, 2005, the RBI Housing Finance Companies Directions, 2025 read with the RBI NBFC KYC Directions, 2025, Section 51A of the UAPA, Section 12A of the WMD Act, and the FIU-IND reporting framework. Since 2019, the Reserve Bank of India regulates and supervises housing finance companies, and reports are filed with FIU-IND.

The core instruments at a glance

Instrument	What it does for a housing finance company
PMLA, 2002	The primary Act that identifies the housing finance company within the financial institution definition and creates the core duties of CDD, record-keeping and reporting.
PML (Maintenance of Records) Rules, 2005	Lays out what to report and when, how to identify customers and beneficial owners, and the duty to appoint officers.
RBI Housing Finance Companies Directions, 2025	The rulebook for this sector that is issued by the RBI which is effective from 28 November 2025 and updated as on 15 April 2026.
RBI NBFC KYC Directions, 2025	The KYC and AML baseline for the company, applied as a category of NBFC.
UAPA Section 51A and WMD Act Section 12A	Enforce targeted financial sanctions for terrorism and proliferation financing.
FATF Recommendations 9 to 23	The international preventive measure standards for financial institutions that India’s framework is built to meet.

What counts as a housing finance company in India?

A housing finance company is a company registered to carry on the business of providing finance for housing as its principal business, whether by lending to individuals to buy or build a home, or by financing developers of housing projects. It is a specialised non banking financial company, and its regulation moved from the National Housing Bank to the Reserve Bank of India in 2019. This guide addresses the housing finance company as a financial institution.

The money laundering risk of a housing finance company emerges from the aspect of property and lending risk. It sits in the source of the margin money or down payment, which may be paid in cash; in the use of a housing loan to move illicit funds into real property; in inflated property valuations that create room to launder value; and in the identity and beneficial ownership of a corporate or developer borrower.

The AML framework therefore leans on identifying the borrower and any beneficial owner, on understanding the source of funds, on the valuation and end use of the property, and on watching for unusual prepayment or settlement patterns to counter ML effectively.

Are housing finance companies reporting entities under the PMLA?

Yes. The Prevention of Money-Laundering Act, 2002 creates the offence of money laundering and places core duties pertaining to AML on reporting entities. A housing finance company falls under the financial institution definition in section 2(1)(l) of the PMLA, and by reference to the definition of housing finance institution in the National Housing Bank Act, 1987, so a housing finance company is a reporting entity under section 2(1)(wa). Accordingly, no notification under section 2(1)(sa) is needed; a housing finance company is inside the regime by name.

This places a housing finance company in the same broad category of reporting entities that file with FIU-IND as banks and other financial institutions, and within the wider AML laws and regulations for financial institutions in India. The obligations are calibrated to the size of the business, but the status is not optional.

Supervisory authority for housing finance companies in India

The supervisor for housing finance companies is the Reserve Bank of India, which took over their regulation from the National Housing Bank in 2019. The RBI issues the sector rulebook, the Reserve Bank of India (Housing Finance Companies) Directions, 2025, effective from 28 November 2025 and updated as on 15 April 2026 and made under the RBI Act, 1934 and the National Housing Bank Act, 1987, and applies its NBFC KYC Directions, 2025 as the KYC and AML baseline, read with the RBI Internal Risk Assessment Guidance of 2024. The National Housing Bank continues to play a role in refinance and inspection.

The Financial Intelligence Unit – India receives, analyses and disseminates the reports a housing finance company files. The Enforcement Directorate investigates and prosecutes the offence of money laundering under the PMLA. This can be simply understood as follows, the RBI sets and supervises the rules, FIU-IND receives the intelligence, and the ED enforces the criminal law.

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AML Regulatory Requirements for Housing Finance Companies in India

The law that governs a housing finance company does not sit in one place. It is a layered framework, and it helps to see it grouped as the official source set groups it. This consists of the core legislation, the overarching obligations, the supervisor for the Housing Finance Company and its directions. In addition to this, the miscellaneous official reports, the international standards, and the allied laws outline the requirements in detail. Each category below lists the instruments that apply, with a short note on what each does for a housing finance company.

The framework includes the PMLA Act as the parent and core legislation, read with the PML Rules outlining the operational duties. The RBI Directions specifically address what housing finance companies must undertake and follow. In addition to this, the UAPA and the WMD Act impose counter terrorism and proliferation financing sanctions; and the allied laws, including each institution’s own establishing statute, shape the risk. The risk based approach further reinforces this entire framework.

Core Legislation

The primary statutes and rules that create the AML, CFT and CPF obligations are grouped into AML Legislation, CFT Legislation, and CPF Legislation.

AML Legislation

Prevention of Money-Laundering Act, 2002 (PMLA)

This is the core legislation on AML statute and identifies housing finance companies as a reporting entity. It defines the offence of money laundering and imposes the duties to counter it, such as customer due diligence under Section 11A and record-keeping under Section 12, that a housing finance company must run across its acquisition and resolution business.

A housing finance company deals in the settlement of acquired debts and the sale of security, as a result, its exposure sits in the source of settlement funds and the identity and beneficial ownership of asset buyers, which is where the Act comes in.

The PML (Maintenance of Records) Rules, 2005 (PMLR)

The rules support the PMLA and lay down the compliance practices for regulated entities like housing finance companies. They set what to report and when under Rule 3 and Rule 8, how to identify customers and beneficial owners as per Rule 9, and the duty to appoint a Principal Officer and Designated Director as elaborated under Rule 7. The PMLR has been amended through 31 Gazette notifications and orders.

The 31 PMLR Amendment Notifications, in Date Order:

Gazette notification and date	Key change or rule touched
G.S.R. 389(E), 24 May 2007	The first amendment to the 2005 Rules widened the scope of Rule 2 by bringing within the definition of suspicious transactions those with no discernible economic justification, no bona fide purpose, or potential links to terrorism financing. It further amended Rule 3 to cover cash transactions involving forged or counterfeit currency, replaced Rule 8 relating to reporting information to the Director, and relaxed Rule 9 by requiring only one certified copy instead of three.
G.S.R. 816(E), 12 November 2009	This amendment brought significant changes to the 2005 Rules. It introduced definitions for non profit organisation and regulator, expanded the scope of suspicious transactions, and made receipts exceeding Rupees 10 lakh received by non profit organisations reportable. It also amended Rule 6 to require records to be retained for ten years and revised Rule 9 to strengthen customer due diligence by requiring the identification of beneficial owners, ongoing due diligence, the prohibition of anonymous accounts, and the implementation of a Client Identification Programme.
G.S.R. 76(E), 12 February 2010	Adjusted Rules 3, 4, 5, and 7 to strengthen record-keeping requirements and reporting cross references. The amendment also introduced the first Explanation to Rule 9(1A), defining the beneficial owner as the natural person who ultimately owns or exercises control over a client or on whose behalf a transaction is conducted.
G.S.R. 508(E), 16 June 2010	The amendment revised Rules 2, 9, and 10 governing definitions, customer due diligence, and record-keeping. It strengthened the customer due diligence and record retention framework by updating the manner in which reporting entities identify customers and maintain records.
G.S.R. 980(E), 16 December 2010	The amendment introduced the small account framework by defining the terms Designated Officer and small account, recognising the NREGA job card and the Aadhaar letter as officially valid documents under Rule 2, and inserting Rule 9(2A) to regulate the opening and monitoring of small accounts.
G.S.R. 481(E), 24 June 2011	The amendment revised Rule 1 by replacing the original long title with the shorter name, Prevention of Money-Laundering (Maintenance of Records) Rules, which has since become the standard abbreviated title used for the Rules.
G.S.R. 576(E), 27 August 2013	This amendment implemented revisions to Rules 2 and 3 and inserted new provisions after Rule 10 to update the definitions, strengthen the requirements for reporting cash and suspicious transactions, and align the record-keeping framework with the reporting obligations.
G.S.R. 288(E), 15 April 2015	It revised the definitions listed under Rule 2, including defining whom and what the operative rules are applicable to. This was the first amendment in 2015 that opened the door for further amendments.
G.S.R. 544(E), 7 July 2015	Revamped Rules 2, 9 and 10 at the same time which covered definitions, customer due diligence, record-keeping, identification of customers and records to be maintained bv the reporting entities, such as housing finance companies.
G.S.R. 730(E), 22 September 2015	It introduced changes to Rules 2 and 7 which outline the definitions and the need for a Principal Officer and setting up an internal reporting mechanism to strengthen the governance and reporting functions.
G.S.R. 882(E), 18 November 2015	This amendment was the final for the year 2015. It focused on revising the definitions, previsions on reporting, changing the manner of reading key terms and how transaction details are to be put forth before the FIU.
G.S.R. 347(E), 12 April 2017	Revised Rule 2 and inserted Rule 9A to introduce the Central KYC Records Registry into the Rules. It required reporting entities to upload customer KYC records to the central registry and established the framework for reusing those records, laying the foundation for the present day CKYCR.
G.S.R. 538(E), 1 June 2017	Rules 2 and 9 were amended to integrate Aadhaar into the customer due diligence framework through Aadhaar based identification and authentication for KYC. The scope and application of these provisions were later reshaped by the Supreme Court’s judgment on Aadhaar.
G.S.R. 1038(E), 21 August 2017	The amendment revised the definitions in Rule 2 by updating several key terms that determine the application of the operative provisions of the Rules.
G.S.R. 1318(E), 23 October 2017	Further updated the definitions in Rule 2 by revising several key terms to keep the regulatory framework aligned with evolving legal and operational requirements.
G.S.R. 456(E), 16 May 2018	Revised the definitions and customer due diligence provisions to clarify their scope and strengthen the process for identifying and verifying customers as part of the ongoing development of the customer due diligence framework.
G.S.R. 1078(E), 31 October 2018	Incorporated revisions to Rule 9 which outlines the customer due diligence process. The revisions updated the process for identification of customers and beneficial owners for reporting entities.
G.S.R. 108(E), 13 February 2019	Revision of Rules 2 and 9 on definitions and customer due diligence to reflect the legislative changes relating to the use of Aadhaar, updating the methods available for customer identification and verification.
G.S.R. 381(E), 28 May 2019	The amendment revised Rule 9 by updating the customer identification and verification process and introducing revised methods for confirming a customer’s identity as part of the changes to the customer due diligence framework following the Aadhaar reforms.
G.S.R. 582(E), 19 August 2019	This amendment changed Rules 2 and 9 relating to definitions and customer due diligence and inserted new provisions after Rule 11 to strengthen the framework for customer information, record-keeping, and compliance as part of the broader 2019 reforms.
G.S.R. 669(E), 18 September 2019	This introduced further revisions to Rules 2 and 9 by updating key definitions and refining the customer due diligence process as part of the series of customer due diligence reforms introduced in 2019.
G.S.R. 840(E), 13 November 2019	It redrafted Rule 9 and made further changes to the identification and verification requirements, as the last amendment for the year 2019.
G.S.R. 228(E), 31 March 2020	This amendment revised the definitions and reporting provisions by updating key terms and modifying the procedures for reporting transactions, marking the first of three amendments introduced in 2020.
G.S.R. 251(E), 13 April 2020	Revised Rule 8 governing the submission of transaction reports to the Financial Intelligence Unit – India by updating the manner, format, and information that reporting entities are required to furnish.
G.S.R. 254(E), 16 April 2020	A follow up Rule 8 redrafting the reporting provisions and the route by which reports reach the FIU.
G.S.R. 798(E), 28 December 2020	A landmark that took the regime beyond the financial sector. Read with G.S.R. 799(E) and 800(E), it identified real estate agents and DPMS and appointed their regulator, reaching out to the non financial businesses.
G.S.R. 575(E), 13 July 2022	Took the International Financial Services Centre definition into the Rules with a tailored beneficial owner provision for IFSC entities and added a Rule 9A applicable to IFSC on the CKYCR, aligning the Rules with the GIFT City regime.
S.O. 1074(E), 7 March 2023	A major amendment taking in definitions of politically exposed persons, non profit organisations and group and a Rule 3A duty for group wide AML policies and cutting the company beneficial ownership threshold to 10 per cent, and change to Rule 9(3)(e), of direct relevance to a housing finance company lending to a corporate or developer borrower.
G.S.R. 652(E), 4 September 2023	The second major 2023 amendment. It required the Principal Officer at management level, cut the partnership beneficial ownership threshold from 15 to 10 per cent, added a control explanation, required disclosure status of trustees, and obtained the results of any Rule 3 and Rule 9 analysis into the records kept.
G.S.R. 745(E), 17 October 2023	Redrafted Rules 2, 3, 8 and 9 in, and was the last amendment notification for the year 2023.
G.S.R. 419(E), 19 July 2024	Rewrote Rule 9(1C) on the KYC Identifier and set a seven day deadline to update a CKYCR record after any change, added a duty to fetch the updated record, and redrafted Rule 9A(2)(g) on filing, retrieving and using registry records, changing how current central KYC data is kept.

The PML (Manner of Receiving the Records Authenticated Outside India) Rules, 2005

Rules which outline the manner for accepting customer records authenticated outside India. This becomes relevant where a housing finance company lends to a non resident Indian buyer or a foreign owned developer and must rely on identity and ownership documents executed and certified abroad.

CFT Legislation

The Unlawful Activities (Prevention) Act, 1967 (UAPA)

India’s counter terrorism statute. Section 51A requires regulated entities such as housing finance companies to screen customers and beneficial owners against the designated lists and to freeze, without delay, the funds and assets of listed persons and entities, whatever the size of the exposure.

Procedure for implementation of Section 51A of the UAPA (order dated 2 February 2021; corrigenda dated 15 March 2023 and 29 August 2023)

The official procedure a housing finance company follows to apply Section 51A. The RBI Directions that outline the requirement to include screening and freezing measures into the institution’s controls, turning the statutory order into a workable process.

The Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (WMD Act)

India’s counter proliferation financing statute. The legal basis for targeted financial sanctions relating to the financing of weapons of mass destruction can be found under Section, and reaches a housing finance company, particularly where an acquired asset or a settlement has a cross border dimension.

Procedure for implementation of Section 12A of the WMD Act (dated 1 September 2023)

The official procedure for applying Section 12A mirrors the Section 51A screening and freezing steps, applied by a housing finance company alongside its terrorism list screening.

The WMD and their Delivery Systems (Prohibition of Unlawful Activities) Implementation Rules, 2016

Rules implementing the WMD Act and supporting the proliferation financing controls a housing finance company must operate.

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Overarching

The shared national obligations that a housing finance company plugs into as a reporting entity.

CERSAI Central KYC Records Registry (CKYCR) Operating Guidelines, 2025

The Central KYC Records Registry acts as a central storage unit for customer KYC records. The process involves a housing finance company that uploads the records. It can reuse a customer’s existing record, keeping KYC consistent and preventing duplication. Getting beneficial ownership and identity data right for an institutional customer at onboarding is what makes the registry useful.

FINnet 2.0 reporting formats (2024) and the FINGate 2.0 user manuals

The reporting platform for all regulated entities is the FIU-IND. Its current formats, through which a housing finance company enrols and files, are covered in the FINGate 2.0 manuals covering enrolment, request response and reports.

Procedure for Aadhaar authentication under Section 11A of the PMLA (9 May 2019)

The procedure for reporting entities other than banking companies to apply to use Aadhaar authentication services, relevant where a housing finance company verifies an individual’s identity through Aadhaar.

Sectoral

The supervisor and its directions. The Reserve Bank of India regulates housing finance companies and issues the KYC Directions the institution works from, read with its consolidated master directions and internal risk assessment guidance.

Reserve Bank of India

The RBI (Housing Finance Companies) Directions, 2025

The sector rulebook, and the most important instrument on this page. Issued by the RBI, effective from 28 November 2025 and updated as of 15 April 2026, and made under the RBI Act, 1934 and Sections 30, 30A, 32 and 33 of the National Housing Bank Act, 1987, the Directions govern the registration, prudential conduct and supervision of housing finance companies. They set the sector context within which the AML and KYC obligations are applied.

The RBI (Non Banking Financial Companies Know Your Customer) Directions, 2025

The KYC and AML baseline for a housing finance company. Issued by the RBI on 28 November 2025 and updated as of 29 December 2025 and applicable to all categories of NBFC, the KYC Directions set out customer identification and due diligence, beneficial owner identification, periodic updates, the ML and TF risk assessment, the appointment of a Designated Director and Principal Officer, reporting, record management and the implementation of Sections 51A and 12A. Where this article states a duty at the level of the law, the KYC Directions are where a housing finance company finds the detail.

RBI Internal Risk Assessment (IRA) Guidance for ML/TF Risks (2024)

The RBI guidance that calls the internal risk assessment the bedrock of the risk based approach and requires its documented outcome to go to the board, applied by every housing finance company in preparing and updating its risk assessment.

RBI Consolidated Master Directions and the KYC compliance notification (28 November 2025)

On 28 November 2025 the RBI issued its consolidated master directions and a notification on compliance with KYC norms, under which the category specific KYC Directions were made, and earlier KYC directions stand repealed or superseded to the extent provided.

Miscellaneous

Official reports and guidance that sit outside the binding rulebook but shape how a housing finance company reads its risk and its duties.

FIU-IND Annual Report 2024 to 2025

The national FIU’s annual account of the reports it received, analysed and disseminated, a useful read on reporting volumes and priorities across reporting entity types.

Directorate of Enforcement Annual Report 2025 to 2026

The Enforcement Directorate’s annual account of investigations, provisional attachments and prosecutions under the PMLA, showing how the criminal enforcement end of the framework is used.

FIU-IND and its Core Functions and FAQs

An explanation of what FIU-IND does and how reporting works, a useful primer for an institution’s reporting function.

MHA National Counter Terrorism Policy and Strategy

The Ministry of Home Affairs statement of national counter terrorism policy, which frames the CFT duties that Section 51A places on a housing finance company.

International Standards

The global benchmarks India is measured against, and the sources a housing finance company can use to calibrate a risk based approach.

FATF Recommendations

The international AML, CFT and CPF standards. Recommendations 9 to 23 set the preventive measures for financial institutions, and Recommendation 6 on targeted financial sanctions was updated by FATF in June 2026. India’s framework for housing finance companies is built to meet them.

FATF Mutual Evaluation Report on India, 2024 (and Executive Summary)

The peer assessment of India’s AML and CFT system, which examined how the financial sector’s preventive measures and supervision work in practice.

Basel Committee, Sound Management of Risks Related to Money Laundering and Financing of Terrorism (2014, revised July 2020)

The Basel Committee guidance on managing ML and TF risk, a benchmark for the risk based approach and group wide controls that a housing finance company can read across to its own risk management.

FATF Risk Based Approach Guidance for the Banking Sector (2014)

FATF sector guidance on applying the risk based approach in banking and financial institutions, useful to a housing finance company in shaping its customer due diligence and monitoring.

Allied Laws

The wider body of law that defines each institution’s own mandate and the predicate offences and enforcement machinery around money laundering. A housing finance company operates under the National Housing Bank Act, 1987 and the RBI Act, while the predicate and enforcement Acts shape the risk it must assess and the conduct it may need to report.

The allied laws that most often bear on a housing finance company’s regulatory and operational risks include the National Housing Bank Act, 1987 and the Reserve Bank of India Act, 1934.

The National Housing Bank Act established the framework for housing finance institutions and facilitated the transfer of regulatory powers over housing finance companies from the National Housing Bank to the Reserve Bank of India in 2019. The RBI regulates HFCs as a category of non banking financial companies under the RBI Act, 1934 and applicable RBI directions.

HFCs are exposed to money laundering, and financial crime risks due to activities such as property backed lending, borrower assessment, ownership verification, and source of funds checks. Various predicate offence and enforcement laws therefore form part of the broader AML/CFT framework applicable to HFCs.

The Companies Act, 2013, the Bharatiya Nyaya Sanhita, 2023, and the Bharatiya Nagarik Suraksha Sanhita, 2023 provide the corporate governance, criminal law, and procedural framework relevant to fraud, investigations, and enforcement actions.

The Foreign Exchange Management Act, 1999 and the Benami Transactions (Prohibition) Act, 1988 are relevant to foreign exchange compliance and risks relating to concealed ownership and benami property transactions.

Other laws that address predicate offences generating proceeds of crime include the Prevention of Corruption Act, 1988, Narcotic Drugs and Psychotropic Substances Act, 1985, Fugitive Economic Offenders Act, 2018, Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Foreign Contribution (Regulation) Act, 2010, and laws relating to smuggling, prohibited arms, chemical weapons, and corruption oversight.

These laws support the broader AML/CFT framework by helping HFCs identify risks linked to customers, transactions, and potential proceeds of crime.

Core AML/CFT/CPF Obligations for Housing Finance Companies in India

Across that framework, the regulations require a housing finance company to do the following. This article keeps each at the level required by law; a compliance requirements guide explains how to do each.

Register with FIU-IND. Enrol on the FINnet 2.0 / FINGate 2.0 portal so the institution can file its reports.
Appoint officers. Appoint a Designated Director and a management level Principal Officer under Rule 7 of the PMLR and the RBI Directions. The same person cannot hold both roles, and both are informed to FIU-IND and the RBI.
Conduct the internal risk assessment. Run an ML and TF risk assessment across customers, products, channels and geographies, document it, and take its outcome to the board, as the RBI Directions and the IRA Guidance require.
Document AML policy, controls and procedures. Adopt a board approved policy that turns the risk assessment into the institution’s operating procedures.
Customer identification and CDD. Identify and verify every customer and the beneficial owner (a controlling interest of more than 10 per cent for a company or partnership, and more than 15 per cent for an unincorporated association or body of individuals, with the separate trust test), with enhanced due diligence for politically exposed persons and high risk customers, under Section 11A of the PMLA, Rule 9 of the PMLR and the RBI housing finance company KYC Directions 2025. Given the property lending business, the identification of borrowers and any beneficial owner, the source of margin money, and the valuation and end use of the property are central.
Ongoing monitoring and periodic updates. Monitor transactions on an ongoing basis, and refresh KYC at least once every 2, 8 and 10 years for high, medium and low risk customers. Review each customer’s risk categorisation at least once every six months.
Sanctions screening. Screen customers and beneficial owners against the designated lists under Section 51A of the UAPA and Section 12A of the WMD Act, and freeze and report any match, verifying the relevant UNSC and domestic lists daily.
Regulatory reporting. File cash transaction reports for cash above Rupees 10 lakh, suspicious transaction reports of any value, counterfeit currency reports and, where a housing finance company finances a cross border transaction, cross border wire transfer reports of Rupees 5 lakh or more where applicable, under Rule 3 and Rule 8 of the PMLR. Cash and related reports are filed monthly, by the 15th day of the succeeding month; suspicious transaction reports are filed promptly, through FINnet 2.0.
Record management, CKYCR and FINnet 2.0. Keep transaction records for five years from the date of the transaction, and identity records, account files and correspondence for five years after the relationship ends, under Section 12 of the PMLA. Upload customer KYC records to the CKYCR under Rule 9A, and file all prescribed reports through FINnet 2.0.
Training and awareness. Train staff by role to apply the controls and recognise red flags in housing finance, such as cash margin money, inflated valuations and unusual prepayments.
Independent testing and audit. Test the programme through internal audit, compliance assurance or independent review, and close every finding.
Run group wide controls. Where the institution has subsidiaries, apply AML and CFT programmes at group level, including for branches and majority owned subsidiaries, as the RBI Directions require.

What this article does not cover

This article explains the laws and regulatory instruments that apply to housing finance companies. It does not provide a control compliance manual, and it does not restate each institution’s own establishing statute or its developmental mandate, except where they bear on the AML duties. For implementation, a housing finance company separately documents customer acceptance, KYC and CDD procedures, beneficial owner identification, sanctions screening, transaction monitoring, suspicious transaction escalation, staff training, audit testing and board reporting. Those controls are the subject of the companion compliance guide.

To see how the housing finance company framework fits within the sector, see AML laws and regulations for financial institutions in India, and to place it within the national picture, see AML laws and regulations in India.

From regulation to compliance: your next step

Knowing the law is step one. These obligations only protect an institution when they are built into a working programme of risk assessment, policy, customer due diligence, monitoring, screening, reporting, training and independent review. For a housing finance company, the identification of borrowers and asset buyers and their beneficial owners and the scrutiny of the source of settlement funds are the controls that matter most. Understanding the stages of money laundering and how the sanctions screening process works is a useful starting point.

Want to confirm the 2025 directions for your institution?

AML India can walk you through the RBI housing finance company KYC Directions and build a proportionate programme for a housing finance business.

Frequently Asked Questions

What are the housing finance companies?

A company whose principal business is providing finance for housing, whether to individual homebuyers or to developers of housing projects. It is a specialised non banking financial company, regulated by the RBI since 2019, and it is a reporting entity under the PMLA, within the financial institution definition.

Are housing finance companies reporting entities under the PMLA?

Yes. A housing finance company is a reporting entity under section 2(1)(wa) of the PMLA because it is a financial institution within section 2(1)(l), which takes its meaning from section 45-I of the RBI Act, 1934. No separate notification is needed; a housing finance company is inside the regime by virtue of what it is.

Which RBI direction applies to a housing finance company?

The sector rulebook is the RBI (Housing Finance Companies) Directions, 2025, effective from 28 November 2025 and updated as of 15 April 2026, and the KYC and AML baseline is the RBI NBFC KYC Directions, 2025, issued on 28 November 2025 and updated as of 29 December 2025, read with the RBI Internal Risk Assessment Guidance of 2024.

Do housing finance companies carry out retail KYC?

A housing finance company deals mainly with corporate borrowers, selling banks and the buyers of acquired assets rather than retail customers over a counter, so its customer due diligence centres on those parties and their beneficial owners, and on the source of settlement funds. Where a housing finance company deals with individual borrowers or buyers, ordinary KYC applies. The full AML framework applies in either case.

What must a housing finance company report to FIU-IND?

Cash transaction reports for cash above Rupees 10 lakh, suspicious transaction reports of any value, counterfeit currency reports, and, where a housing finance company finances a cross border transaction, cross border wire transfer reports of Rupees 5 lakh or more where applicable. Cash and related reports are filed monthly by the 15th of the succeeding month, and suspicious transaction reports promptly, through FINnet 2.0.

Do the sanctions rules apply to housing finance companies?

Yes. The screening duties under Section 51A of the UAPA and Section 12A of the WMD Act apply to every housing finance company, whatever the size of the exposure. A housing finance company screens customers and beneficial owners against the United Nations and domestic designated lists and freezes and reports any match.

Official sources and review

Last reviewed: July 2026. This guide is grounded in the following primary official sources, linked to their official source where available.

Why work with AML India

AML India helps housing finance companies meet their PMLA and RBI obligations, from risk assessment and policy through to CDD, screening, monitoring, reporting, training and independent review.

Industries we serve: housing finance companies, NBFCs, hire purchase, mortgage guarantee and asset reconstruction companies, insurers, payment system operators and aggregators, banks, DNFBPs, securities intermediaries and IFSC and GIFT City entities.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik