RBI To Rationalise Risk Weightage On Housing Loans To Push Demand

In order to promote the housing sector, Reserve Bank of India on Friday decided to rationalise risk weightage on housing loans, making the product attractive for both borrower and lenders.

With revision in the risk weightage, the requirement of capital provision for banks will come down. This will encourage banks to push housing loan products with attractive features.

“Recognising the criticality of the real estate sector in the economic recovery, given its role in employment generation and the interlinkages with other industries, it has been decided, as a countercyclical measure, to rationalise the risk weights by linking them only with Loan to Value (LTV) ratios for all new housing loans sanctioned up to March 31, 2022,” RBI Governor Shaktikanta Das said.

Such loans shall attract a risk weight of 35 per cent where LTV is less than or equal to 80 per cent, and a risk weight of 50 per cent where LTV is more than 80 per cent but less than or equal to 90 per cent, he said.

This measure is expected to give a fillip to bank lending to the real estate sector, the statement on Developmental and Regulatory Policies said.

According to a Reserve Bank of India senior official, the RBI”s move will give a major boost to the housing sector particularly the retail housing.

“Banks will definitely be benefited with lower provisioning by lending to this segment which will ultimately encourage banks to make this product more price attractive,” the official said.