RBI Policy: LTV relaxed, home loans to get cheaper

MUMBAI: In a move that would turn home loan cheaper, the Reserve Bank of India today relaxed loan to value ratio, standard asset provisioning and risk weight for individual housing loans.

"As a countercyclical measure, the LTV ratios, risk weights and standard asset provisioning rate for individual housing loans sanctioned on or after the date of this circular will be reduced," said RBI in a circular.

For loans above Rs 75 lakh, with LTV ratio of above 75%, risk weight is reduced by 25% to 50%. Standard asset provision for all individual home loans is kept at 0.25%.

For loans up to Rs 30 lakhs to Rs 75 lakh with LTV ratio of more than 80%, risk weight has been brought down to 35%. LTV or loan to value is the highest loan amount a bank can disburse in proportion to the price of property. According to the norms, if the LTV is 80-90%, risk weight will be 50%.

"Reduction in LTV and risk weight is a function of RBI's comfort for the portfolio," said Parthasarthy Mukherjee MD and CEO Lakshmi Vilas Bank. "It will ensure that banks keep the rates low."