RBI eases provisioning norms on loans for low-income housing

Micro Finance companies to benefit from RBI move

Reserve Bank of India has eased norms for assigning risk weights and making provisions for loans extended for low income housing which are covered by the new credit guarantee fund.

The government of India has set up a Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH). This provides cover for advances given for low income housing, RBI said.

Non-banking finance companies and microfinance institutions may assign zero risk weights for the guaranteed portion. The balance due in excess of the guaranteed portion would attract a risk-weight in line with present norms.

Also, if the advance covered by the fund becomes non-performing, MFIs need not make provisions towards the guaranteed portion. However, they have to make provision for the amount due in excess of the guaranteed portion.