The Reserve Bank of India (RBI), in its policy on Friday, today altered the risk weight on home loans by linking them solely to loan-to-value (LTV) ratios instead of also the size of the loan.

Share Market Live

NSE

This means that banks now have to keep aside lower funds for every home loan they extend if a borrower is putting down a large component as down payment.

"This is the right policy. The risk on a home loan is linked to the amount of equity than an individual puts in a property not the size of the loan," HDFC Vice Chairman and CEO Keki Mistry said. "This makes housing loans safer. The safer the loan, the lower the interest rate can be."

First Published:Oct 9, 2020 6:10 PM IST