The RBI on Friday changed rules for new home loans to boost the real estate sector.
Under the current regulations, differential risk weights are applicable to individual home loans. If risk weights rise, a bank has to make more provisions and thus the banks’ ability to lend gets restricted.
"In recognition of the role of the real estate sector in generating employment and economic activity, it has been decided to rationalise the risk weights and link them to LTV ratios only for all new housing loans sanctioned up to March 31, 2022," RBI chief Shaktikanta Das said.
This move will likely make more credit available to borrowers, particularly for the higher value loans.