The central bank has also decided to reduce the standard asset provisioning rate on such loans.
Mumbai: In a move that could reduce new home loan rates and boost the housing sector, the RBI on Wednesday reduced the risk weightage or the amount that a bank is required to set aside for giving a loan to cover unforeseen risks.
“Considering the importance of the housing sector and given its forward and backward linkages to the economy, it has been decided, as a countercyclical measure, to reduce the risk weight on certain categories of housing loans sanctioned on and after today,” the RBI said in a statement.
The central bank has also decided to reduce the standard asset provisioning rate on such loans. This will further reduce the expenses of banks in giving a home loan and may lead to lower home loan rates.
“The current measure of lower risk weightage and lower provisioning requirement should bring in higher growth for the sector in the quarters to come,” said Mr Siddharth Purohit, senior equity research analyst, banking, Angel Broking.
Welcoming the decision, ICICI Bank MD Chanda Kochhar said the SLR cut and reduction in risk weights for housing loans are positive moves that will support bank liquidity and encourage growth in housing loans.