Risk Weight Changes for UCB Housing Loans (2008)

Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications ( 482 kb ) Claims secured by residential property – Change in limits for risk weights-UCBs RBI/2007-08/368 UBD.PCB.Cir.No. 53/13.05.000/07-08 June 16, 2008 The Chief Executive Officers of All Primary(Urban) Co-operative Banks Dear Sir/Madam, Claims secured by residential property – Change in limits for risk weights-UCBs Please refer our circular UBD.PCB.Cir.No. 40/13.05.000/06-07 dated May 4, 2007 wherein it was decided to reduce the risk weight on the residential housing loans to individuals from the existing 75 per cent to 50 per cent as a temporary measure for loans up to Rs.20 lakh. Banks were, however, advised that the same would be reviewed after one year, keeping in view the default experience and other relevant factors. It has now been decided to link the risk weights of loans to individuals meant for acquiring residential properties which are fully secured by mortgages on the residential property that is or will be occupied by the borrower or that is rented, to the loan to value (LTV) ratio. 2.In this connection, a reference is invited to paragraph 169 of the Annual Policy Statement for the year 2008-09 (copy of the paragraph enclosed ) The modified risk weights on residential housing loans to individuals are as under: LTV* Ratio Sanctioned Amount of Loan Risk Weight. LTV ratio = or Up To Rs 30.00 lakh 50% LTV ratio = or Above Rs 30.00 Lakh 75% LTV ratio > 75% Irrespective of the amount. 100 % (unchanged) * LTV ratio should be computed as a percentage with total outstanding in the account (viz. “principal +accrued interest + other charges pertaining to the loan” without any netting) in the numerator and the realizable value of the residential property mortgaged to the bank in the denominator. 3. All other instructions issued in this regard remain unchanged. 4. Please acknowledge receipt to the Regional Office concerned. Yours faithfully, (A.K Khound) Chief General Manager-in-Charge Annex Paragraph 169 of the Annual Policy Statement for the year 2008- 09 Prudential Norms for Housing: 169. On a review of recent developments, it has been decided to enhance the limit of Rs.20 lakh to Rs.30 lakh in respect of bank loans for housing in terms of applicability of risk weights for capital adequacy purposes. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-08/368 · issued 16 Jun 2008. The plain-English explanation above is BankPulse’s own independent summary.

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