RBI cuts provisions, risk weights to make home loans cheaper; boost for real estate

The amount of money to be set aside for every loan made, has been lowered to 0.25 percent from the earlier 0.40 percent, which will help reduce the interest rates on home loans

PTI June 07, 2017 20:01:17 IST
RBI cuts provisions, risk weights to make home loans cheaper; boost for real estate

Mumbai: In what can make new home loans cheaper, the Reserve Bank today reduced the standard assets provisions on individual housing loans to 0.25 percent and also lowered the risk weights on such lending.

RBI cuts provisions risk weights to make home loans cheaper boost for real estate

Representational image. Reuters

"As a countercyclical measure, the LTV (loan to value) ratios, risk weights and standard asset provisioning rate for individual housing loans" have been reviewed from today, the RBI said in the second bi-monthly policy statement.

The standard asset provisions, or the amount of money to be set aside for every loan made, has been lowered to 0.25 percent from the earlier 0.40 percent, which will help reduce the interest rates on home loans.

It also eased the risk weights for certain categories of loans, which will help banks on the capital adequacy front, and enable them to make more loans.

The risk weight for individual housing loans above Rs 75 lakh has been reduced to 50 percent from the earlier 75 percent, while for loans between Rs 30 and Rs 75 lakh, a single LTV ratio slab of up to 80 percent has been introduced with a risk weight of 35 percent.

RBI Governor Urjit Patel explained that this is a part of the central bank and the government attempts of "targeted interventions" to help prop-up the sagging growth numbers.

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