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Informist, Monday, Aug 12, 2024

--RBI reviews risk weights for housing finance companies 

--RBI: New risk weights for housing finance companies effective today 

MUMBAI – The Reserve Bank of India today said that the risk weighted assets that are computed for undisbursed amount of housing loans or other loans of housing finance companies will be capped at the risk weighted asset computed on a notional basis for equivalent amount of disbursed loan.

In a notification in 2021, the RBI had said that "The risk-weighted amount of an off-balance sheet item that gives rise to credit exposure shall be calculated by means of a two-step process. Step 1: the notional amount of the transaction is converted into a credit equivalent amount, by multiplying the amount by the specified credit conversion factor or by applying the current exposure method; and Step 2: the resulting credit equivalent amount is multiplied by the risk weight applicable, viz. zero per cent for exposure to Central Government/State Governments, 20% for exposure to banks and 100% for others."

In the case of commercial real estate or residential buildings, the risk weight of fund-based and non-fund based exposures, which are classified as standard, will be 75%, and for those which are not classified as standard, their risk weight will be the same as other assets which is currently at 100%, it said in a notification today.

This follows a review of the risk weights for housing finance companies. The guidelines will come into effect from today, it said.  End

Reported by Kshipra Petkar

Edited by Ashish Shirke

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