The Reserve Bank of India today extended the low-risk load on housing loans by one year, saying it will boost credit flow to the sector. In October 2020, the RBI had decided to rationalize the risk weights for all new housing loans sanctioned up to March 31, 2022 by adding them only to the LTV (loan to value) ratio. Now, it has been extended till March 31, 2023.
Governor Shaktikanta Das said that this new measure will help in improving credit flow to the housing sector. By lowering the risk weight, the need for capital provisioning for banks will be reduced and it will ensure that more credit is available to the borrowers, especially for high-end properties.
“The Reserve Bank, vide circular dated October 12, 2020, had rationalized the risk weights for individual housing loans by adding only the loan to value (LTV) ratio for all new housing loans sanctioned up to March 31, 2022. Recognizing the importance of the housing sector, its multiplier effect and its role in supporting overall credit growth, it has been decided that the risk weighting prescribed in the circular will continue for all new housing loans sanctioned till March 31, 2023.” RBI said in a statement.
Analysts say this will help banks lend more to individual home buyers without feeling the pressure on their balance sheets. In other words, it will help the lenders on the capital adequacy front and enable them to provide more loans.
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