Reserve bank of India has made housing loans cheaper for individual loan applicants by cutting down provisions. With this move, the loan interest rate is set to come down and the overall EMI of home loans will become cheaper. Not only that, this will exert pressure on the lenders for providing competitive interest rates to retain their customers.
Earlier this week, RBI had retained the same rate for its repo rate and statutory liquidity ration. After that, there were speculations that there might not be any cut in the EMIs of home loan or any other type of loan.
Speaking on the development, Arundhati Bhattacharya, Chairman SBI said that there are more possibilities for further rate cuts in the second half of this year. This is because of lower than projected inflation. She also stated that move to reduce risk weight for home loans of over ₹30 lakh will create more capital with the banks and it is going to prove as a positive move in the coming months.
Reserve Bank of India has made significant changes in its risk weight structure applicable for home loans. For home loans above ₹30 lakhs and below ₹75 lakhs, the risk weight has been reduced to 35%. At the same time, for the loans above 75 lakhs, risk weight has been reduced to 50%, which was earlier 75%.
Chanda Kochhar, MD & CEO of ICICI Bank, stated that cutting down SLR and risk weight is a positive move by RBI and it will increase liquidity with the banks. Also, this will create more possibilities for interest rate reduction in the coming months.