RBI Modified Provisioning Limit For Housing Loan

Reserve Bank on May 15 relaxed the risk provisioning norm for housing loan up to Rs 30 lakh, a move that would make it easier for banks to provide loans for purchase of residential properties. The central bank on Thursday issued notification in pursuance of the annual credit policy announcement made by the Reserve bank Governor Y V Reddy on April 29.

The move would provide the bank additional capital for lending more to housing sector. However, it may not result in immediate softening of interest rate for the housing sector, said Oriental Bank of Commerce Executive Director Allen C A Pereira. The RBI has modified the provisioning limit for housing loan to take care of the growing property rates mainly in the urban centers. As per the Basel II norms, banks are required to keep 9 per cent of the specified portion of the loan amount as capital. For up to Rs 30 lakh housing loan the risk provisioning norm would apply for the 50 per cent of the loan value. Earlier the specified amount was 75 per cent of the loan value between Rs 20-30 lakh. For loans exceeding Rs 30 lakh for purchase of residential property, the banks would have to make a risk provision on 75 per cent of the loan amount.