RBI cuts home loan risk weightage
In a move to boost the real estate sector, the Reserve Bank of India on Friday reduced the risk weight on home loans and residential housing projects.
RBI, on its website, stated the risk weight on housing loans up to R75 lakh has been brought down to 50% from the earlier requirement of 75%. On home loans above R75 lakh, the risk weight has been brought down to 75% from 100% earlier. “The government had provided additional tax benefits for home loan borrowers in the Budget and RBI has followed it up with these announcements,” said Keki Mistry, vice-chairman & CEO of HDFC Ltd.
The move is intended to help banks price loans better. However, bankers say it will be tough for them to cut home loan rates since they are already being offered at base rates, below which banks are not permitted to lend. In the premium housing segments, rates may see a marginal downtick. “A lot of banks offer home loans up to R75 lakh at the base rate. So for banks to lower interest rate on these loans, they would have to first reduce the base rate itself, which seems difficult right now,” said Ram Sangapure, general manager, Central Bank of India.
Recently, Bank of Baroda announced all its home loans will now be offered at 10.25% which is its base rate. Similarly, Indian Overseas Bank confirmed it offers home loans up to R75 lakh at the base rate.
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