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Home loan: New home loan borrowers will continue to enjoy lower interest rates as RBI expands risk weighting mechanism


Recognizing the importance of the housing sector and its multiplier effect on the economy, the RBI has extended the risk weighting schedule for new LTV-only housing loans until March 31, 2023. As a result, new borrowers from home loans will continue to get loans. at today’s low interest rates.

The RBI in its Development and Regulatory Policy Statement released on 8th April 2022 said:

The Reserve Bank circular dated October 12, 2020 had streamlined the risk weights for individual home loans by linking them only to loan-to-value (LTV) ratios for all new sanctioned home loans through March 31, 2022 Recognizing the importance of the housing lending sector, its multiplier effects and its role in supporting overall credit growth, it has been decided that the risk weightings as prescribed in circular ibid will continue for all new lending. housing sanctioned until March 31, 2023.

This facility introduced in October 2020 had reduced the capital requirement for lenders. As a result, lenders were required to keep less capital in reserve than before, and as a result more funds were available for lending. It has also reduced the cost of funds for lenders and hence they are able to offer loans at lower interest rates to borrowers.


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