New RBI norms may make home loans cheaper by 30bps

MUMBAI: Interest rates on home loans are expected to come down by another 25-30 basis points, triggered by the Reserve Bank of India’s move to lower risk weights on select home loans of up to Rs 75 lakh where borrowers are willing to put in more money.

According to Crisil Research, the new norms might be applied to home finance companies as well. “While the National Housing Bank (NHB) has not yet revised its risk-weight norms for housing finance companies (HFCs), going by past history (NHB typically follows the RBI with a lag), we expect the NHB to follow suit,” Crisil said.

Theoretically, lower risk weights should significantly boost the return on equity (RoE) of the mortgage portfolio of banks. “However, with competition in home loans continuously intensifying and the interest rate cycle turning south, we believe this is unlikely, and banks will have to pass on the benefit to borrowers. Therefore, any boost to RoE would be marginal,” Crisil said.

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Source:Timesofindia

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