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RBI relaxes norms for housing loans by coop banks

RBI relaxes norms for housing loans by coop banks
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First Published: Tue, Jun 17 2008. 03 20 PM IST
Updated: Tue, Jun 17 2008. 03 20 PM IST
PTI
Mumbai: Making it easier for urban cooperative banks to extend housing loans, the Reserve Bank of India has relaxed the risk provisioning norm for purchase of residential properties up to Rs30 lakh.
The RBI had issued a notification on 16 June in pursuance of the annual credit policy announcement made by the Reserve Bank Governor Y V Reddy on 29 April.
Earlier, on 15 May, the central bank had relaxed the risk provisioning norms for housing advances by the commercial banks.
“It has been decided to enhance the limit of Rs20 lakh to Rs30 lakh in respect of bank loans for housing in terms of applicability of risk weights for capital adequacy purposes. Accordingly, such loans will carry a risk weight of 50%,” Reddy had said.
The move would provide the urban cooperative banks additional capital for lending more to housing sector.
For banks, the amount of capital they are required to set aside for each loan is decided by minimum capital adequacy ratio prescribed by the central bank. Capital adequacy ratio is the ratio of a bank’s net worth to its risk-weighted credit.
According to the analysts, the RBI has modified the provisioning limit for housing loan to take care of the growing property rates mainly in the urban centres.
The risk provisioning earlier was 75% of loan values between Rs20-30 lakh.
For housing loans exceeding Rs30 lakh, the banks would have to make a risk provision on 75% of the loan amount.
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First Published: Tue, Jun 17 2008. 03 20 PM IST