In a move that will encourage banks to lend more for housing in large
cities and make high value home loans cheaper, the Reserve Bank of
India reduced the risk weightage on home loans above Rs 75 lakh to 50%
from 75% earlier.
"Considering the importance of the housing sector and given its
forward and backward linkages to the economy, it has been decided as a
countercyclical measure, to reduce the risk weight on certain
categories. It has also been decided to reduce the standard asset
provisioning on such loans," RBI said in its monetary policy.
In its monetary policy review the RBI retained the repo rate at 6.25%
and the reverse repo rate at 6%. The marginal standing facility (MSF) –
an emergency funding facility continue to remain at 6.5% as also the
cash reserve ratio of 4%.
In another move that will ease liquidity in the banking system by
close to Rs 50,000 crore, Reserve Bank of India has reduced
the statutory liquidity ratio (SLR) – the prescription for minimum
holding of government securities. As against investing 20.5% of their
deposits in gilts, banks will now have to invest only 20% with effect
from June 24, 2017. RBI said that the reduction was aimed at allowing
banks to comply with the international norms on liquidity coverage that
come into effect from January 2019.
It was widely expected that the central bank would keep rates on
hold. However, economists believed that RBI would ease its stance from
'neutral' to 'accommodative' to send a message that easy money
conditions would prevail. The central bank however continued to maintain
a neutral stance on the ground that easing of prices might be
temporary. It also pointed out that fuel prices have been hiked since
the inflation numbers were published and prices might rise further.
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