RBI Gov­er­nor Ur­jit Pa­tel

Business Sphere - - CON­TENTS - By Our Cor­re­spon­dent

Home loans may get cheaper with bankers to­day in­di­cat­ing that in­ter­est rate on such loans will come down fol­low­ing re­duc­tion of risk weights by the RBI. The decision to re­duce the risk weights for home loans over Rs 30 lakh cat­e­gory will re­lease cap­i­tal for the bank­ing in­dus­try and is a pos­i­tive move, SBI Chief Arund­hati Bhat­tacharya said in a state­ment. The risk weight for in­di­vid­ual hous­ing loans above Rs 75 lakh has been re­duced to 50 per cent from the ear­lier 75 per cent, while for loans be­tween Rs 30 and Rs 75 lakh, a single Loan to Value (LTV) ra­tio slab of up to 80 per cent has been in­tro­duced with a risk weight of 35 per­cent. RBI Gov­er­nor Ur­jit Pa­tel ex­plained that this is a part of the cen­tral bank and the gov­ern­ment at­tempts of "tar­geted in­ter­ven­tions" to help propup the sag­ging growth num­bers. How­ever, the Re­serve Bank left lend­ing rates un­changed cit­ing risks to in­fla­tion due to spurt in farm loan waivers by states but raised lend­ing ca­pac­ity of banks to sup­port eco­nomic growth. The large cut in in­fla­tion pro­jec­tion by the RBI in the mon­e­tary pol­icy is in con­so­nance with ground re­al­i­ties and is likely to cre­ate room for rate cuts in the lat­ter half of the year, Bhat­tacharya said. Ac­cord­ing to Bank of In­dia MD Din­a­bandhu Mo­ha­p­a­tra, the re­duc­tion in statu­tory liq­uid­ity ra­tio by 50 ba­sis points ef­fec­tive June 24 will fa­cil­i­tate banks to meet the LCR re­quire­ment of 100 per cent com­fort­ably by Jan­uary 1, 2019. How­ever, this mea­sure will not have an im­pact on credit off­take as banks are al­ready in a sit­u­a­tion of ex­cess SLR in spite of slug­gish credit growth at 5.7 per cent, he said. "The re­duc­tion in risk weights and stan­dard as­set pro­vi­sion­ing on cer­tain cat­e­gories of hous­ing loans will lower hous­ing loan rates and in­crease hous­ing loan portfolio of banks," he said. "Re­duc­tion in the risk weights on cer­tain cat­e­gories of the hous­ing loans is in­deed a pos­i­tive sig­nal.

Since re­tail loans are only show­ing signs of growth and hous­ing loan seg­ment, which is the ma­jor sec­tor of re­tail, re­duc­tion in LTV ra­tio, risk weights and stan­dard as­sets pro­vi­sion­ing would spur up growth in this seg­ment," Cen­tral Bank of In­dia Chair­man Ra­jeev Rishi said. Wel­com­ing the decision of RBI, ICICI Bank MD and CEO Chanda Kochhar said the SLR cut and re­duc­tion in risk weights for hous­ing loans are pos­i­tive moves that will sup­port bank liq­uid­ity and en­cour­age growth in hous­ing loans. Ac­cord­ing to Govind Sankara­narayanan, Chief Op­er­at­ing Of­fi­cer Tata Cap­i­tal, the decision to re­duce the risk weight on hous­ing fi­nance for prop­er­ties Rs 30-75 lakh should help re­duce the bur­den borne by fi­nancers through cap­i­tal costs and lay the plat­form for a rate cut in the fu­ture. Mean­while, the RBI also said its forex de­part­ment will hence­forth ex­am­ine pro­posal of com­pa­nies be­fore they can is­sue masala bonds to raise funds from over­seas mar­kets. The changes come as part of RBI's norms on ex­ter­nal com­mer­cial bor­row­ings (ECBs), trade credit, bor­row­ing and lend­ing in for­eign cur­rency. "On a re­view of the laid down frame­work for is­suance of ru­pee de­nom­i­nated bonds over­seas (masala bonds) and with a view to har­monise the var­i­ous el­e­ments of the ECB frame­work, it has been de­cided that any pro­posal of bor­row­ing by el­i­gi­ble en­ti­ties by is­suance of these bonds will be ex­am­ined at the For­eign Ex­change De­part­ment, Cen­tral Of­fice, Mum­bai," RBI said in a no­ti­fi­ca­tion. Masala bonds are catch­ing up fast as a source of rais­ing fund from over­seas mar­kets in­clud­ing those by state-owned com­pa­nies like NHAI and NTPC. Be­sides, RBI has also re­vised pro­vi­sions for ma­tu­rity pe­riod, all-in-cost ceil­ing and rec­og­nized lenders (in­vestors) of masala bonds. For bonds up to USD 50 mil­lion per fi­nan­cial year, the ma­tu­rity pe­riod will be three years and for bonds rais­ing over USD 50 mil­lion (equiv­a­lent in In­dian ru­pee) per fi­nan­cial year should be five years. Ear­lier, the min­i­mum ma­tu­rity pe­riod was of five years. "The all-in-cost ceil­ing for such bonds will be 300 ba­sis points over the pre­vail­ing yield of the gov­ern­ment of In­dia se­cu­ri­ties of cor­re­spond­ing ma­tu­rity," said the no­ti­fi­ca­tion. For recog­nised in­vestors, RBI said, the en­ti­ties per­mit­ted as in­vestors should not be re­lated party. A recog­nised in­vestor is any en­tity from a Fi­nan­cial Ac­tion Task Force (FATF) com­pli­ant ju­ris­dic­tion. "The changes/re­vised in­struc­tions in re­spect of is­suance of Ru­pee de­nom­i­nated bonds will be ap­pli­ca­ble from the date of is­suance of this cir­cu­lar," it added. In 2015, Re­serve Bank had per­mit­ted In­dian en­ti­ties to is­sue ru­pee de­nom­i­nated bonds in for­eign mar­kets, pop­u­larly termed as masala bonds, so as to ac­cess cap­i­tal from even out­side des­ti­na­tions.

RBI Gov­er­nor Ur­jit Pa­tel

SBI Chief Arund­hati Bhat­tacharya

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.