High value loans were expected to get...
cheaper, after the Reserve Bank of India (RBI) reduced the risk weightage on home loans above Rs 75 lakh to 50 per cent from 75 per cent earlier this week.
"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. It has also been decided to reduce the standard asset provisioning on such loans," the RBI had said on June 7 after announcing its second bi-monthly monetary policy.
SBI usually leads the interest rate cycle in India as far as commercial banks are concerned, with other public and private sector banks following suit.
"The decision to reduce the risk weights for home loans over Rs. 30 lakh category will release capital for the banking industry and is a positive move,"SBI chairperson Arundhati Bhattacharya had said after Wednesday's RBI policy. For loans between Rs 30 lakh and Rs 75 lakh, a single LTV (loan to value) ratio slab of up to 80 per cent, has been introduced by the RBI with a risk weight of 35 per cent. LTV ratio is the maximum amount of loan that can be disbursed against the value of a property.
Last month SBI cut rates on home loans of up to Rs 30 lakh by 25 basis points (0.25 per cent) for new borrowers in a bid to cash in on the demand generated by the Narendra Modi government's efforts to push for affordable housing. The rate was reduced to 8.35 per cent from 8.60 per cent. Earlier, in January the public sector lender had reduced its lending rates across the board making home, auto, personal and other cheaper.
The RBI on Wednesday kept key rates unchanged, as was widely expected, while lowering its projections for inflation after recent data showed consumer prices rising more slowly. Repo rate - the rate at the which the central bank lends short-term money to banks - stays unchanged at 6.25 per cent. CRR or Cash Reserve Ratio - which is a portion of deposits that banks must mandatorily keep with the RBI—also stays unchanged at 4 per cent.
SLR or statutory liquidity ratio was, however, cut by 50 basis points. Banks are required to invest certain percentage of their deposits in specified financial securities like Central Government or State Government securities. This percentage is known as SLR. The cut in SLR gives banks more liquidity which gives them room to cut rates.