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RBI reduces standard assets provisions to 0.25 per cent, risk weights on lending to make new home loans cheaper

The Reserve Bank of India on Wednesday reduced the standard assets provisions on individual housing loans to 0.25 per cent and also lowered the risk weights on such lending. These decisions can make new home loans cheaper.


By   |  Updated On : June 07, 2017 07:43 PM
Reserve Bank of India (Image: PTI)

Reserve Bank of India (Image: PTI)

Mumbai :  

The Reserve Bank of India on Wednesday reduced the standard assets provisions on individual housing loans to 0.25 per cent and also lowered the risk weights on such lending. These decisions can make new home loans cheaper.

“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 per cent from the earlier 0.40 per cent, 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 per cent from the earlier 75 per cent, while for loans between Rs 30 and Rs 75 lakh, a single LTV ratio slab of up to 80 per cent has been introduced with a risk weight of 35 per cent.

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.

Also read: RBI lowers economic growth forecast for current fiscal to 7.3 per cent; hopes remonetisation would pick-up in consumer spending

Also read: RBI's second bi-monthly monetary policy: Repo rate unchanged at 6.25%, FY 2017-18 growth projection cut to 7.3% from 7.4%

 

Also read: RBI lowers economic growth forecast for current fiscal to 7.3 per cent; hopes remonetisation would pick-up in consumer spending
First Published: Wednesday, June 07, 2017 07:35 PM
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