Rbi Plans Rules On Margins, Paperwork For Home Loans

The Reserve Bank of India (RBI) is planning to formulate detailed guidelines on margins and documentation for home loans.

This follows a letter written by the finance ministry to the RBI urging the regulator to keep a close tab on the ballooning home loan portfolio of commercial banks.

The ministry feels that the home loan bubble could burst and some banks might burn their fingers if adequate care is not taken while expanding the home loan portfolio.

Banks across the country have been aggressively pushing home loans. In fact, the phenomenal non-food credit offtake in 2002-03 was largely on account of the growth in retail loans, driven by home loans.

 

Some banks have in recent times been offering home loans of up to 100 per cent on the value of the property.

The RBI is likely to come out with detailed guidelines on the margin on the declared value of the property. This could be set at 15-20 per cent of the declared value.

The margin helps the bank recover money when the account becomes sticky and the asset has to be repossessed and sold.

The issue was discussed at a meeting of RBI Deputy Governor G Muniappan with the CEOs of select public sector, private and foreign banks on Saturday.

At the meeting, the RBI referred to a few cases