85 breached
The Indian rupee has breached the significant psychological barrier of 85 against the US dollar, marking an all-time low amid a confluence of domestic and global pressures.
With an aim to improve liquidity for home buyers and promote realty sector, the Reserve Bank of India on Friday decided to rationalise risk weightage on housing loans, making it lucrative for both borrower and lenders.
With this latest move, the requirement of capital provision for banks will come down. The revision in risk weightage will also encourage banks to push housing loan products with attractive features.
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Addressing the media after the Monetary Policy Committee’s bi-monthly meeting, RBI Governor Shaktikanta Das said, “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.”
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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.
Das noted that the move is expected to give a fillip to bank lending to the real estate sector.
Realty players have hailed the decision which would boost liquidity for the prospective home buyers while the banks believe that the 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,” a Bank of India official said.
Commenting on the decision, Housing.com Group CEO Dhruv Agarwala said rationalising risk weightage on home loans and linking it to LTV ratio will effectively result in higher credit flow to the real estate sector, which is positive news for the sector.
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