RBI/2006-2007/373
UBD. PCB.Cir No. 40/ 13.05.000/ 2006-07 May
4, 2007 The Chief Executive
Officers of
All Primary (Urban)
Co-operative Banks Dear
Sir/Madam Annual
Policy Statement for the Year 2007-08
Residential
Housing Loans: Reduction of Risk Weight-UCBs Please
refer to para 184 of the Annual
Policy Statement for the year 2007-08 (copy enclosed). 2.
In terms of our circular UBD.PCB.Cir.33/09.116.00/04-05
dated January 5, 2005 the risk weights on housing loans to individuals, which
were fully secured by mortgage of residential housing properties, was increased
from 50 per cent to 75 per cent for capital adequacy purposes. 3.
It has now been decided to reduce the risk weight on the residential housing loans
to individuals from the existing 75 per cent to 50 per cent as a temporary measure.
This dispensation will be applicable for loans up to Rs.20 lakh and will be reviewed
after one year, keeping in view the default experience and other relevant factors. 4.
Please acknowledge receipt to our Regional Office concerned. Yours
faithfully, (N.S.Vishwanathan)
Chief
General Manager-in-Charge
Annual
Policy Statement for the Year 2007-08 Residential
Housing Loans: Reduction of Risk Weight 184.
Under the standardised approach for credit risk under Basel II which is being
implemented as per the schedule already indicated, the risk weight on residential
property fully secured by mortgages is prescribed at 35 per cent, subject to fulfillment
of strict prudential criteria. Keeping this in view and the fact that banks have
been advised to tighten their credit administration in this area in particular,
from time to time, it is proposed: •
to reduce the risk weight on the residential housing loans to individuals from
the existing 75 per cent to 50 per cent as a temporary measure. This dispensation
will be applicable for loans up to Rs.20 lakh and will be reviewed after one year,
keeping in view the default experience and other relevant factors |