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The regulatory authority responsible for all types of monetary activities in India, the Reserve Bank of India (RBI) has made an announcement on Thursday and said that it has relaxed the risk-provisioning norm for housing loan up to Rs 30 lakh. The officials of the bank have stated that the move is going to make it easier for the banks to provide loans for purchase of residential properties, further. The officials added that the RBI has issued the notification following the annual credit policy announcement made by the Reserve bank Governor Y V Reddy on 29th April.
The sources related to the development have informed that Mr. Reddy did comment at the time of announcing the credit policy, "It has been decided to enhance the limit of Rs 20 lakh to Rs 30 lakh in respect of bank loans for housing in terms of applicability of risk weights for capital adequacy purposes. Accordingly, such loans will carry a risk weight of 50 per cent". The sources added that the latest decision of RBI is going to provide the bank, an additional capital for lending more to the housing sector. However, the Executive Director of the Oriental Bank of Commerce, Mr. Allen C.A Pereira said in this context that the move is not likely to result in immediate softening of interest rate for the housing sector.
According to one of the highly-placed sources from the RBI, the authority has actually modified the provisioning limit for housing loan with a view to take care of the growing property rates, primarily in the urban centers. The source said that the banks need to keep 9 per cent of the specified portion of the loan amount as capital, according to the Basel II norms and the risk-provisioning norm is going to be applied for the 50 per cent of the loan value, in case of housing loans up to Rs 30 lakh. The industry sources added that the earlier specified amount was 75 per cent of the loan value between Rs 20-30 lakh. The sources also informed that the bank is also required to make a risk provision on 75 per cent of the loan amount, for the loans more than Rs 30 lakh for purchase of residential property.
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Posted On : 16 May 08
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