RBI Lowers the Minimum Risk Weight on Home Loan to Support Affordability

Affordable housing is the topmost concern of the government towards the Indian real estate industry. The urban population explosion makes it imperative for the authorities to think of better ways to make residential real estate affordable enough for the Lower Income Group (LIG) and the Economically Weaker Section (EWS). Continuous steps are being taken in this direction, the latest one being taken by the RBI.

RBI Lowers the Minimum Risk Weight on Home Loan to Support Affordability

The Reserve Bank of India announced on 29 September that it has decided to lower the minimum risk weight on home loan for lower amounts of loans that are sufficiently collateralized. There is also a reduction of 50 basis points in the Repo rates. These two are together expected to bring down the home loan interest rates. So you do not have to rely on an Loan Eligibility Calculator to assess your home loan needs, here is a detailed description of how home loan has become affordable with lower risk weight.

What is Risk Weight? The risk weight is assigned by the RBI to the banks on various assets owned by them. The loans lent out by the banks are also their assets and call for a minimum risk weight to be set aside by them as capital. It is a certain percentage of the value and is mandatory for the banks to maintain the Capital Adequacy Ratio (CAR). [Read more…]