RBI may limit bank loans to real estate

November 21, 2006	(Be the first to rate this story!)  Loading ...
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The Reserve Bank of India has now begun to review the banks lending huge amount of money for financing real estate projects. Continuous escalation in prices of the property has called for such a tight scrutiny, even as the regulator has followed prudential norms to maintain the flow of bank credit by raising the risk weights for capital allocation.

Issuing new guidelines, the RBI is making an effort to limit the flow of bank credit to realty sector, in accordance with the limits enforced for capital markets. According to the analysts, raising the risk weights on such type of loans is another way to resolve the problem.

Sources say the commercial projects of the realty sector have been put under lens by the RBI but the authorities will take some time to check the flow of credit.

This has certainly cautioned the banks which have started lending to the commercial real estate sector with a discerning eye. Data showcased by the RBI reveals that banks which have shown keen interest in funding commercial real estate sector are not necessarily exposed highly to retail home loans. Moreover, no interconnection has yet been found between the two categories of lending.

News Published Under:   Real Estate India, Banking and Finance |

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