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Moody's terms easing of housing finance norms by RBI as 'credit negative'

The lower capital requirements will weaken banks' protection from the housing sector

Abhijit Lele  |  Mumbai 

RBI, reserve bank of India
Moody’s said over the next 12-18 months, overall system credit growth will remain muted given banks’ weak balance sheets amid continued asset quality deterioration

Rating agency Moody’s on Thursday said that the Reserve Bank of India’s move to relax for housing may increase the risks for It is negative.
 
On June 7, lowered the and standard on housing in select loan-size categories.
The lower capital requirements will weaken banks’ protection from the housing sector, which has grown rapidly in recent years, and will encourage greater lending.
 
Moody’s warned that this growth is occurring as non-bank companies increasingly target the home-loan segment, posing greater downside risk if there is a correction in  

 
The RBI’s notification affects the of newly originated housing in two main categories. For housing more than Rs 75 lakh, the will fall to 50 per cent from 75 per cent. And for housing between Rs 30-75 lakh, the will decline to 35 per cent from 50 per cent.
 
At the same time, the has removed the previous distinction of based on loan-to-value ratios for in the same category.
 
also has lowered the standard requirement to 25 basis points from 40. There is no change to the for housing up to Rs 30 lakh.
 
Moody’s said over the next 12-18 months, overall system growth will remain muted given banks’ weak amid continued deterioration. At the end of March 2017, annual bank growth was 7.6 per cent, down from 10.2 per cent the previous year.
 
Although lower would boost sluggish growth while limiting the effect on banks’ capital position, the competition for housing has significantly increased among and non-bank companies. Since 2015, housing loan book has grown at substantially higher rate than pace of overall bank growth.
 
In year ended March 2015, Housing portfolio grew by 16.7 per cent while overall loan growth was 7.8 per cent. And during the period of FY16 and Fy17, housing portfolio rose by 18.8 per cent and 15.2, while over-all bank expanded by 10.2 per cent and 7.6 per cent respectively, Moody’s added.

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Moody's terms easing of housing finance norms by RBI as 'credit negative'

The lower capital requirements will weaken banks' protection from the housing sector

The lower capital requirements will weaken banks' protection from the housing sector
Rating agency Moody’s on Thursday said that the Reserve Bank of India’s move to relax for housing may increase the risks for It is negative.
 
On June 7, lowered the and standard on housing in select loan-size categories.
The lower capital requirements will weaken banks’ protection from the housing sector, which has grown rapidly in recent years, and will encourage greater lending.
 
Moody’s warned that this growth is occurring as non-bank companies increasingly target the home-loan segment, posing greater downside risk if there is a correction in  
 
The RBI’s notification affects the of newly originated housing in two main categories. For housing more than Rs 75 lakh, the will fall to 50 per cent from 75 per cent. And for housing between Rs 30-75 lakh, the will decline to 35 per cent from 50 per cent.
 
At the same time, the has removed the previous distinction of based on loan-to-value ratios for in the same category.
 
also has lowered the standard requirement to 25 basis points from 40. There is no change to the for housing up to Rs 30 lakh.
 
Moody’s said over the next 12-18 months, overall system growth will remain muted given banks’ weak amid continued deterioration. At the end of March 2017, annual bank growth was 7.6 per cent, down from 10.2 per cent the previous year.
 
Although lower would boost sluggish growth while limiting the effect on banks’ capital position, the competition for housing has significantly increased among and non-bank companies. Since 2015, housing loan book has grown at substantially higher rate than pace of overall bank growth.
 
In year ended March 2015, Housing portfolio grew by 16.7 per cent while overall loan growth was 7.8 per cent. And during the period of FY16 and Fy17, housing portfolio rose by 18.8 per cent and 15.2, while over-all bank expanded by 10.2 per cent and 7.6 per cent respectively, Moody’s added.
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Business Standard
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Moody's terms easing of housing finance norms by RBI as 'credit negative'

The lower capital requirements will weaken banks' protection from the housing sector

Rating agency Moody’s on Thursday said that the Reserve Bank of India’s move to relax for housing may increase the risks for It is negative.
 
On June 7, lowered the and standard on housing in select loan-size categories.
The lower capital requirements will weaken banks’ protection from the housing sector, which has grown rapidly in recent years, and will encourage greater lending.
 
Moody’s warned that this growth is occurring as non-bank companies increasingly target the home-loan segment, posing greater downside risk if there is a correction in  
 
The RBI’s notification affects the of newly originated housing in two main categories. For housing more than Rs 75 lakh, the will fall to 50 per cent from 75 per cent. And for housing between Rs 30-75 lakh, the will decline to 35 per cent from 50 per cent.
 
At the same time, the has removed the previous distinction of based on loan-to-value ratios for in the same category.
 
also has lowered the standard requirement to 25 basis points from 40. There is no change to the for housing up to Rs 30 lakh.
 
Moody’s said over the next 12-18 months, overall system growth will remain muted given banks’ weak amid continued deterioration. At the end of March 2017, annual bank growth was 7.6 per cent, down from 10.2 per cent the previous year.
 
Although lower would boost sluggish growth while limiting the effect on banks’ capital position, the competition for housing has significantly increased among and non-bank companies. Since 2015, housing loan book has grown at substantially higher rate than pace of overall bank growth.
 
In year ended March 2015, Housing portfolio grew by 16.7 per cent while overall loan growth was 7.8 per cent. And during the period of FY16 and Fy17, housing portfolio rose by 18.8 per cent and 15.2, while over-all bank expanded by 10.2 per cent and 7.6 per cent respectively, Moody’s added.

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Business Standard
177 22