RBI’s caution on home loan push

RBI governor Raghuram Rajan on Friday cautioned banks against lending to high credit risk people in their attempt to find more business.

“Some banks are sticking to traditional customers offering traditional products in the traditional. And going forward, clearly, that business is going come under increasing competition and increasing threat. One example of this is we had number of setbacks in large project loans. And so increasingly the flavour of the moment is let’s all make home loans. Because when you are making home loans, you better be careful that you are not picking up high risk applicants,” said Dr Rajan at the 11th IDBRT Banking Technology Excellence Awards meet.

RBI has recently slashed risk weightage for hous- ing loans as the government aims to catapult real estate and construction to faster growth orbit. Following this, banks are seen to be pushing home loan products as they grapple with abysmal credit offtake due to low capital investment by private sector.

He also told the banks to revisit their cost structure as he pointed that their costs have not come down despite computerisation. Dr Rajan said the RBI may do away with two- factor authentication for smaller transactions.

If banks or credit

● card providers are willing to take the risk, Dr Rajan said, then RBI may allow small- value payments without a second level of protection.