RBI Deputy Governor R Gandhi asks bankers to be innovative on home loans
One such product would be savings-induced home loan or a home loan deposit. The willing customer may be induced to generate a savings balance by way of monthly or periodic deposits. This will enable the creation of a track record for repayment of future home loan products
Aug 21, 2014
Source : The Economic Times
Reserve Bank of India


MUMBAI: The Reserve Bank of India will encourage banks and individuals to be actively involved in home loan deposits, a savings product that will help showcase the repaying ability of customers seeking to borrow money to buy a house.

"There is a felt need for financial innovation with respect to loan products," Reserve Bank of India deputy governor R Gandhi said on Wednesday at a real estate-banking conference here.

"One such product would be savings-induced home loan or a home loan deposit. The willing customer may be induced to generate a savings balance by way of monthly or periodic deposits. This will enable the creation of a track record for repayment of future home loan products," he said.

Once a customer reaches a threshold balance, financial institutions can consider sanctioning a housing loan, he suggested. The balance in the product could act as a collateral or margin.

The amount deposited every month will act as the basis of assessing the repayment capacity of customers for calculating their monthly repayments.

Such a product will aid the government's efforts to promote affordable housing.

The Narendra Modi-led government has already laid out a plan to create 100 smart cities with the aim of "housing for all by 2020" while reducing interest rates on home loans. This product may help lower interest rates as well, with better appraisal of potential borrowers.

Currently, home loan interest rates offered by banks and financial institutions are in the range of 10-11%.

In his first Union budget last month, Finance Minister Arun Jaitley earmarked Rs 8,000 crore for rural housing, along with other measures.

Prime Minister Modi has repeatedly said that providing low-cost housing was a priority for his government, which had sought Singapore's expertise to implement the proposed scheme.

Moreover, the RBI will also periodically review the definition of affordable housing, taking the inflation rate into account.

The RBI is tweaking its policies, recognising the need for affordable housing and other essential real estate sectors, Gandhi said, adding that collection of real estate data (by banks) on transactions will also help the central bank to take policy decisions.

As part of recent policy measures, the central bank last month allowed long-term bonds raised by banks for infrastructure lending to be exempted from mandatory reserve requirements.

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