It has been decided to rationalize the risk weight of home loan and link it to loan-to-value (LTV) ratio for all new housing loans sampled by 31 March 2022 only.
This change is expected to provide more loans to customers.
This change has been made in view of the role of real estate in increasing employment and economic activities.
The Reserve Bank of India (RBI) on Friday changed the rules for new home loans to give a boost to the real estate sector. It has been decided to rationalize risk weights for all new housing loans sampled by 31 March 2022 and link them to loan-to-value (LTV) ratio. This change is expected to provide more loans to customers.
RBI Governor Shaktikanta Das said that this change has been made in view of the role of real estate sector in generating employment and boosting economic activities. Differential risk weight applies to individual home loans under current rules. This risk weight is determined by the size of the loan and the loan-to-value ratio.
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What is the loan to value
Loan-to-value means that the bank can give the customer a loan equal to the value of the property. If the risk weight increases, the bank has to make more provision. This limits the bank’s ability to lend.
Housing loan segment will accelerate
Knight Frank India CMD Shishir Baijal said that by March 2022, steps like rationalizing the risk weight of all new housing loans will accelerate the housing loan segment. RBI has also extended the scheme for co-lending of all NBFCs and HFCs. This will increase the availability of credit in the real estate sector.
No change in interest rates
RBI did not make any changes in key interest rates. The market had expected this in advance. He decided to maintain a soft monetary policy to support the economy that was suffering from the coronavirus epidemic.
