No hike in home loan rates, banks not worried

New Delhi / Mumbai: The RBI in its credit policy has left repo rates and reverse repo rates unchanged.

However, keeping inflation in mind, it has hiked CRR by 25 basis points to 8.25 per cent, making it the second hike in two weeks.

The RBI says it is attempting to bring down inflation to 5.5 per cent in the next fiscal and has a long-term target of 4-4.5 per cent. It estimates GDP growth next year will be 8 to 8.5 per cent.

Meanwhile, there are no hikes in loan rates yet. India's biggest home-loan lender ICICI Bank says it will wait and watch before taking any steps.

“We are looking at Rs 8,000 crores or so of liquidity going out of the system, and on 8000 crores the banks will not earn interest,” said ICICI Bank MD and CEO, K V Kamath. “The banks will take this hit in the national context when we have a larger challenge to address. I don’t think it's an issue which will break the backs of banks.”

The credit policy, on the other hand, may just contain a bonanza for home loan users.

The RBI has lowered the risk weightage for loans upto Rs 30 lakh, instead of the previous limit of Rs 20 lakhs. It has also allowed banks to lend more to tier 2 cities or smaller towns by raising the limit to Rs 50 lakhs .

Many feel this is a boost to the home loan market

“I think what it means is somewhere it is a recognition of the fact that home prices have appreciated in the past few years quite considerably and 20 lakhs may not actually indicate the possibility of someone getting a dwelling unit,” explained Yes Bank MD, Ajay Mahajan. “It's not a luxury apartment or a condominium that you can buy for 30 lakhs today, so I think it's more a recognition that even a modest house purchased today in most markets across the country would possibly cost that much.”

As far as the home loan market is concerned, the risk limit was 50 per cent for anything below 20 lakhs, and was 150 per cent for anything above 20 lakhs. The risk weightage has now been increased from 20 lakhs to 30 lakhs as real estate prices have gone up. Up to 30 lakhs, the risk weightage is 50 per cent now, encouraging banks to give more home loans.

With inputs from Jency Jacob