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RBI to toughen norms to curb defaulting low-ticket affordable housing



RBI to toughen norms to curb defaulting low-ticket affordable housing

Mumbai: The Reserve Bank of India is mulling over to increase the loan to value ratio and increasing the risk weights, to address the upsurge in bad loans in the less than Rs. 2 Lakh ticket size. Through this move, the apex banking institute aims to narrow its grip on the low-ticket affordable loan segment.  

A careful analysis of the housing loans data it was discerned that the level of Non-Performing Assets (NPAs) for the ticket size of up to Rs. 2 Lakh has been tremendous, spiraling briskly, said RBI in a statement. The central bank added that banks need to strengthen their screening and follow up, particularly related to lending to this segment.

The banker’s bank is closely monitoring this sector. “We will consider appropriate policy response such as a tightening of the LTV ratios and or an increase in the risk weights, should the need arise,” said RBI.

Housing Finance Companies (HFCs), around 100 of them, are concentrating on low ticket size lending to the self-employed customer segment. In the past financial year, assets under management of HFCs saw a hike of 24%, promoted by enormous opportunities in affordable housing and slower credit growth by banks.

Some Housing Finance Companies operating in the affordable housing arena have displayed an uncommon rise in delinquencies, with gross NPA clocking at 4 to 5%

“The uptick in slippages was expected given increasing delinquencies in the loan against property segment, a sharper focus on low-ticket-size home loans, and increased lending to the self-employed customer segment,” said Rama Patel, Director, CRISIL Ratings.

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