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RBI raises risk weight on home loans
Our Bureau
Mumbai
,
Oct. 26
THE Reserve Bank of India has raised the risk weight that banks will have to assign on home loans to 75 per cent from 50 per cent and on consumer credit to 125 per cent from 100 per cent. .
In the Mid-Term Review of the Annual Policy Statement, the central bank has said, "It is observed that in the recent past, the growth of housing and consumer credit has been very strong. These measures have been proposed as a temporary counter cyclical measure."
RBI had earlier cautioned commercial banks on the aggressive growth of their housing portfolios. Over the past couple of years, banks have been aggressively and profitably pushing retail credit and housing loans, in particular, due to the absence of any `greenfield' projects to deploy their funds.
Competition in the housing loan segment assumed serious proportions with the aggressive slashing of interest rates by banks, in order to capture larger volumes of business, according to industry analysts. However, in the past year, concerns have emerged about the quality of home loans and the increase in non-performing assets in this sector.
Recently, RBI asked banks to avert the growing incidence of frauds in housing finance after a committee appointed by the apex bank listed different ways through which frauds have taken place.
Based on the committee's observations, banks were told to take certain measures, while clearing housing loans.
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