Skip to main content

RBI cuts risk weight for individual home loans

To boost demand for low- cost housing, the Reserve Bank of India (RBI) on Thursday reduced the risk weight for individual housing loans of up to Rs.75 lakh. The minimum risk weight for individual housing loans has been reduced from 50 per cent to 35 per cent.
The risk weight for commercial real estate has been left unchanged at 100 per cent.
For loans of up to Rs.30 lakh, the central bank increased the loan- to- value ( LTV) ratio to 90. LTV is the highest loan amount a bank can disburse, as a proportion of the property price.
Now, banks will have to allocate less capital if risk weights are lower. Most banks have a sizeable portfolio of loans of up to Rs.75 lakh. As capital costs will come down due to lower risk weight, the move is expected to translate into lending rate cuts by banks.
“This will be a boost for the low- ticket housing segment (up to Rs.30 lakh) … increasing the loan- to- value will encourage builders to focus on this segment. With the interest rates coming down, we expect more sanctions and disbursement for banks,” said Rajiv Anand ( group executive and head of retail banking), Axis Bank.
According to the new norms, for loans of up to Rs.30 lakh, the risk weight will be 35 per cent when the LTV is up to 80 per cent. If the LTV for loans is 80- 90 per cent, the risk weight will be 50 per cent.
RBI said earlier, all loans of up to Rs.20 lakh with LTV of 90 per cent had a risk weight of 50 per cent.
In the Rs.30- 75 lakh loan bucket with LTV of 75 per cent, the risk weight will be 35 per cent ( earlier 50 per cent).
For an LTV of 75- 80 per cent, the weight will be unchanged at 50 per cent.
For loans exceeding Rs.75 lakh where loans don’t exceed 75 per cent of the value, the risk weight has been kept unchanged at 75 per cent.
Vibha Batra, senor vicepresident and co- head ( financial sector ratings), Icra, said the credit profile of loans of up to Rs.30 lakh could be riskier and volatile.
“The capital is basically a cushion to absorb unexpected losses. With reduction in risk weights, banks might save on capital but they might also be less prepared to absorb variability in defaults,” Batra said, adding for loans of Rs.30- 75 lakh, the default rates were low.
At its fourth bimonthly review of monetary policy last month, RBI had said risk weights would be reduced to boost affordable housing.
“At present, the minimum risk weight applicable on individual housing loans is 50 per cent. To improve affordability of low- cost housing for economically weaker sections and low- income groups and give a fillip to ‘ housing for all’, while being cognisant of prudential concerns, it is proposed to reduce the risk weights applicable to lower value but well collateralised individual housing loans,” the central bank had said.
Business Standard, New Delhi, 9th Oct. 2015

Comments

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6

Jaitley plans to cut MSME tax rate to 25%

Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem

Don't forget to verify your income tax return in August: Here's the process

  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s