Home loan crackdown soon? Small borrowers under spotlight now

As delinquencies in small-ticket home loans of up to Rs 2 lakh rise, Reserve Bank of India said that it will tighten the lending norms to this segment by increasing the loan-to-value ratio and increase risk weights so that banks have adequate buffers if the loans go sour.

“After a careful analysis of the housing loans data, it has been observed that the level of NPAs for the ticket size of up to Rs 2 lakh has been high and is rising briskly,” RBI said in a statement. “Banks need to strengthen their screening and follow up in respect of lending.”

With corporate loans failing to pick up, banks have been accelerating their retail book, especially the home loans. The small ticket size loans will now come with increased risk weights so that banks go slow on such loans.

RBI also plans to hike the affordable housing tag for loans up to Rs 35 lakh from the existing limit of Rs 20 lakh, which will benefit housing finance companies in the form of tax break. The central bank has allowed banks to club the affordable housing scheme with priority sector lending (PSL), which will help banks meet their PSL targets.

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Soumya Kanti Ghosh, chief economist, SBI, said, “Convergence of the PSL guidelines for housing loans with the affordable housing scheme is a welcome step and may help banks meet the PSL targets. Consequently, the same amount of money will be released from Rural Infrastructure Development Fund and a bank may invest the same with a higher return.

By Manju AB, DNA India