The Insurance Regulatory and Development Authority (IRDA) decided to exclude lending by insurance firms to housing finance companies as exposure to the finance sector.
In a statement, the insurance regulatory body said these loans would be henceforth treated as funding to the housing sector. A similar treatment has been given to lending to infrastructure sector.
The move would benefit housing and infrastructure finance companies as they may get more funding from insurance companies at a time when the money condition is tight with.
Specifically, firms like HDFC and LIC Housing Finance which have the highest rating, but are facing restrictions because of companies hitting their investment limits stand to benefit from the move.
Further, the regulator raised the single company debt exposure limits in housing finance companies to 20 percent of the company's equity plus free reserves plus bonds taken together.
This limit can be increased by an additional 5 percent with the approval of the insurer's board. The single investee company limit was 15 percent for infrastructure companies earlier.