The Reserve Bank of India (RBI) on Thursday set the new home loan norms for the lenders to balance the debt market. The RBI has directed the banks and financial institutions to give the loans to up to Rs.20 lakh to small property that can be maximum 90% value of the property while beyond it, the Loan To Value ratio (LTV) should not exceed 80%.
Following the announcement in the second quarter review of the Monetary Policy, the RBI today issued the circular directing to lenders stated that the borrowers would have to pay the margin money up 20% value of the property. However, giving relax to small properties, the master bank directed the borrowers to pay at least 10% margin money of the property.
Earlier, there was no set norm for home loan exposure.
In order to prevent excessive leveraging by banks, RBI has capped a regulatory ceiling on the LTV ratio in respect of banks' housing loan exposures, which was earlier absent.
Concerning about the teaser loans - the loans that are offered at comparatively lower interest rate in the initial stage but after that are reset at higher interest rate - RBI said that some borrowers might face difficulties when the loan reached at its normal stage.
Many banks at the time of initial loan appraisal, do not take into account the repaying capacity of the borrower at normal lending rates, added the apex bank. 'This could raise the chances of defaulters,' warned RBI.
"Therefore, in view of the higher risk associated with such loans, the standard asset provisioning on the outstanding amount has been increased from 0.40% to 2% with immediate effect. The provisioning on these assets would revert to 0.40% after one year from the date on which the rates are reset at higher rates if the accounts remain 'standard'," RBI further said in a notification.
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