RV Verma, Chairman and Managing Director of National Housing Bank (NHB) has informed a leading media that the body would relax prudential norms for housing finance companies (HFCs).
NHB plans to relax prudential norms for housing finance companies following Reserve Bank of India’s (RBI) decision to reduce risk weight on banks’ home loan over Rs 20 lakh.
Recently, the central bank allowed banks to consider a risk weight of 75 percent for loans above Rs 75 lakh compared to the existing weight of 125 percent.
The reduction in risk weight would benefit banks as they now need to set aside lesser capital against high value lending.
The RBI also reduced the risk weight for loans between Rs 20-75 lakh to 50 percent from 75 percent earlier. NHB is likely to lower the risk weight on loans for property developers to build residential housing projects within the commercial real estate category to 75 percent from 100 percent earlier.
RBI has carved out a new sub-category for residential housing within commercial real estate. It said the new category exhibits lesser risk and volatility and thus will attract a lower 75 percent risk weight provided that the commercial area does not exceed 10 percent of the total real estate.
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