Home loans to get cheaper as RBI reduces risk weights

While RBI maintained a neutral stance in its monetary policy, the relaxation of risk weight requirements against the loan-to-value (LTV) ratio for loans above Rs 30 lakh will make home loans cheaper for borrowers.
 
For loans between Rs 30 lakh and Rs 75 lakh, the risk weight is brought down to 35 per cent with LTV ratio up to 80 per cent, while, for loans above 75 lakh, with LTV ratio of up to 75 per cent, the risk weight is cut down from 75 per cent to 50 per cent.      
 
The relaxation of provisions for individual loans will not only bring down loan rates but also step up the market competition. The apex bank also reduced the standard asset provision to 0.25 per cent for individual housing loans. In addition the statutory liquidity ratio (SLR) was also brought down by 50 basis points to 20 per cent.

The reduction in risk weights and standard asset provisions coupled with lowered SLR is likely to provide liquidity to the banks and cheer the housing loan segment. 
 
Following the announcement of risk weights reduction by the RBI, housing loan stocks gained on the bourses. At 11:30 hrs IST, the Housing Development Finance Corporation was quoting Rs 1634 per share, up by 2.27 per cent on the BSE, while Indiabulls Housing Finance was quoting Rs 1147 per share, up by nearly 1 per cent.