RBI to reduce risk weight on home loans


By Accommodation Times Bureau

Shares of banks and home finance companies exhibited a sudden hike , on June 8 after the RBI’s announcement of the decision to reduce the risk weight on home loans; on June 7 afternoon;  as a part of its bi-monthly monetary policy review.

For private and public sector banks the RBI’s decision might increase lending marginally, and could also help in pushing loans to buyers of affordable homes.

Experts’ views are saying that the central bank’s decision is though positive, but it may not result in a big jump in home loan growth. Currently the decision of RBI is seemingly applicable to banks only but when the National Housing Bank, the regulator for HFCs will adopt a similar decision, home finance companies (HFCs) are also expected to benefit.

HDFC, Kotak Mahindra Bank, PNB Housing Finance rose between 1 percent and 3.9 percent on June 8. The RBI has dropped the risk weight to 35 percent from 50 percent for loans above Rs 30 lakh and up to Rs 75 lakh. And for the loans more than Rs 75 lakh risk weight has been reduced from 75 percent to 50 percent.

Expert analysts say companies will have higher capital due to this decision and this will prove to be an indirect push to the housing sector. “The move releases more capital for banks and NBFCs and could marginally help increase loan disbursement but it is more of an indirect push for affordable housing. As of now, we are positive on stocks of CanFin Homes, PNB Housing Finance and Gruh Finance,” said Jignesh Shial analyst at Quant Broking.

“There has been a sharp uptick in shares of financials. There could be a minor dip but investors can use it as an opportunity to go long on stocks such as Federal Bank and RBL which could go to Rs 130 and Rs 600 in the next couple of weeks,” said Ashish Chaturmohta, head of derivatives & technical at Sanctum Wealth Management.

“We are also bullish on LIC Housing Finance, CanFin Homes and DHFL which can rise up to 15 percent in the next three months.”

Traders also favor private banks more due to the disappointing results in the FY 16 by public sector banks. “Private mid-size banks like City Union Bank and Federal Bank have seen more lending growth compared to public banks. Apart from the RERA tailwind that helps it, PNB Housing Finance trades at a lower valuation to peers, making it more attractive,” said Akash Jain, vice-president for research at Ajcon Global.




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