Commercial
banks have urged the Reserve Bank of India (RBI) to raise
the cap on individual home loans for the purpose of classification
under priority sector lending, in the backdrop of the
overall rise in property prices, reports CNBC-TV 18 quoting
Business Standard.
The banks want the central bank to raise the ceiling to
Rs20 lakh, from Rs 15 lakh, for classification under priority
sector.
This demand comes in the light of the overall rise in
property prices. The bankers have also asked the central
bank to reduce the risk weight on staff housing loans
to 35 per cent from the existing 75 per cent, to align
it with Basel II norms.
A delegation of bankers including ICICI Bank managing
director and chief executive officer, K V Kamath, IDBI
chairman and managing director (CMD), V P Shetty, Bank
of Baroda CMD, A K Khandelwal, UTI Bank CMD, P J Nayak
and Citibank chief executive officer (CEO), Sanjay Nayar
made a representation to the Reserve Bank of India governor,
Y V Reddy in a meeting last week.
"In
a meeting with the governor, we requested the RBI to increase
the ceiling for home loan classification under priority
sector to Rs 20 lakh from Rs 15 lakh. We also raised the
issue that banks have to currently classify the housing
loans into two different ways. For the priority sector,
it is below Rs 15 lakh and above Rs 15 lakh.
For provisioning requirement, it is below Rs 20 lakh and
above Rs 20 lakh. Such classifications create administrative
hassles for banks. Hence, we requested the governor to
consider and keep the bifurcation into two classes, upto
Rs 20 lakh and above Rs 20 lakh both for priority and
provisioning purposes,'''' said a banker present at the
meeting.
"Property prices in select locations have increased
by 50 per cent to 100 per cent. Even if there was a correction,
the price rise would still be to the tune of 15 per cent
to 20 per cent. Considering this, the RBI should increase
the ceiling to Rs 20 lakh. This will also enable the banks
to boost their priority sector portfolio,'''' said the CMD
of a public sector bank.
"In respect of housing loans to their own staff members,
banks have the double benefit of not only physical security,
but also specific claims on non-statutory retirement benefits.
Taking cognizance of the lower risk on housing loans to
the staff members (vis-à-vis housing loans to the
public), we requested that at least for these loans, the
risk weights may be reduced suitably,'''' said a senior
banker.
"Under
Basel II norms, a minimum 35 per cent risk weight has
been prescribed for residential mortgages including housing
loans, whereas for India, the risk weight percentage is
75 per cent. Hence, there is a case for bringing down
the risk weights on staff housing loans from the existing
75 per cent to 35 per cent to align them with Basel II
norms,'''' said another banker.
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