Provisioning for personal, housing loans hiked

 Rao explained that the average ticket size of home loans in the banking sector is approximately Rs 10 lakh. The share of home loans exceeding Rs 20 lakhs in the banks' total housing portfolio is very small.

According to a private sector banker, RBI's previous move of hiking the provisioning norm from 0.25% to 0.4% did not generate much of an impact on both the pricing and demand for loans.

Nicholas Winsor, head-personal financial services of HSBC, said: "Through this hike, the RBI has attempted to ensure that the growth in banks' loan books is prudent and that banks provide for potential credit losses. Also, it is a move that aims at protecting banks from over-exposure to these sectors, especially in case of an economic downturn."

In its mid-term review of October 2005, RBI had increased the provisioning requirement on all standard assets, with the exception of direct advances to agricultural and SME sectors, from 0.25% to 0.40% of the funded outstanding on portfolio basis.