With lower capital requirements and risk weights, banks will now have to keep less capital aside which will give a fillip to their lending capacity. The statutory liquidity ratio or the amount which banks are required to keep aside as securities, bonds , gold, cash etc. has been moved lower by 50 basis points to 20% of the Net Demand Liabilities as against 20%. The step is a reflection of the apex body to enable banks in complying with the liquidity coverage ratio of 100% by January 1, 2019 in an easy manner.
And in accordance with the RBI's move in the monetary policy, risk weightage has been reduced for different home loan ticket sizes and loan to value ratio from the existing rates.
For home loan of amount above Rs. 30 lakh and less than Rs. Rs. 75 lakh with LTV ratio of less than or equal to 80%, the risk weightage has been reduced from the previous of 50% to 35%.
Earlier the following rates existed in respect of the risk weightage for the different loan terms.Loan ticket size over Rs. 30 lakh and less than Rs 75 lakh with LTV ratio of 75% or less bore a risk weightage of 35% while loans for amount over Rs. 75 lakh and LTV ratio upto 75% had a 75% risk weightage which has been moved down to 50%.
It is to be noted that the apex body has kept the rates unchanged for home loan size upto Rs. 30 lakh and over Rs. 75 lakh.
LTV or Loan to value ratio is the maximum amount which the lender can disburse as loan amount to the home loan borrower against the value of the property.
And experts claim that with reduction in the risk weightage, cost of the capital shall come down and with it lending rates are expected to further decrease in the near future.
The move is a positive step and will create capital in the banking sector.