Revised risk weights for new housing loans sanctioned from 16.10.2020 to 31.03.2022.
RBI rationalises Risk Weights for Individual Housing Loans
As per the RBI regulations on capital charge for credit risk of individual housing loans by banks, differential risk weights were applicable based on the size of the loan as well as the loan to value ratio (LTV).
In terms of the Statement on Developmental and Regulatory Policies dated 9th October 2020, the RBI, recognising the criticality of real estate sector in the economic recovery, given its role in employment generation and the interlinkages with other industries, decided, rationalization of risk weights on Individual Housing Loans by linking them only with LTV ratios for all new housing loans sanctioned up to March 31, 2022.
It was stated that such loans shall attract a risk weight of 35 per cent where LTV is less than or equal to 80 per cent, and a risk weight of 50 per cent where LTV is more than 80 per cent but less than or equal to 90 percent.
Currently, the capital charge for claims secured by residential property falling under the category of individual housing loans is assigned differential risk weights based on the size of the loan as well as the loan to value ratio (LTV).
As a countercyclical measure, RBI has issued a notification to rationalise the risk weights, irrespective of the amount.
Now, the risk weights for all new housing loans to be sanctioned on or after the date of this circular and upto March 31, 2022 shall be as under:
| LTV Ratio (%) | Risk Weight (%) |
| ≤ 80 | 35 |
| > 80 and ≤ 90 | 50 |
4. The requirement of standard asset provision of 0.25% shall continue to apply on all such loans.
5. The LTV ratios, Risk Weights and Standard Asset Provision for all loans sanctioned prior to the date of this circular shall continue to be as prescribed in terms of the circular dated June 7, 2017.
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