Reserve Bank of India made it easier for urban cooperative banks to extend housing loans by relaxing the risk provisioning norm for purchase of residential properties up to Rs 30 lakh.
The central bank issued this notification on Monday in pursuance of the annual credit policy announcement. Earlier on May 15, the central bank had relaxed the risk provisioning norms for housing advances by the commercial banks. The move would provide the urban cooperative banks additional capital for lending more to housing sector.
For banks, the amount of capital they are required to set aside for each loan is decided by minimum capital adequacy ratio prescribed by the central bank. Capital adequacy ratio is the ratio of a bank’s net worth to its risk-weighted credit.
According to the analysts, the RBI has modified the provisioning limit for housing loan to take care of the growing property rates mainly in the urban centres. The risk provisioning earlier was 75 per cent of the loan value between Rs 20-30 lakh. For loans exceeding Rs 30 lakh for purchase of residential property, the banks would have to make a risk provision on 75 per cent of the loan amount.