In a move that would make it easier for banks to provide home loans to customers, the Reserve Bank of India took steps to relax the risk provisioning norm for housing loan up to Rs 30 lakh.

In accordance with the annual credit policy announcement made by the Reserve bank Governor Y V Reddy on April 29, the central bank issued the notification which would go a long way in helping the public in the purchase of residential properties.

"It has been decided to enhance the limit of Rs 20 lakh to Rs 30 lakh in respect of bank loans for housing in terms of applicability of risk weights for capital adequacy purposes. Accordingly, such loans will carry a risk weight of 50 per cent," Reddy had said.

Reacting on the announcement, Allen C A Pereira, Executive Director of The Oriental Bank of Commerce, said that, this would provide the bank additional capital for lending more to housing sector. However, it may not result in immediate reduction of interest rate for the housing sector.

This move of the RBI comes in the light of the growing property rates mainly in the urban centers.

The banks are required to keep 9% of the specified portion of the loan amount as capital, as per the Basel II norms. For up to Rs 30 lakh housing loan the risk provisioning norm would apply for the 50 per cent of the loan value.

Earlier the specified amount was 75% of the loan value between Rs 20-30 lakh. For loans exceeding Rs 30 lakh for purchase of residential property, the banks would have to make a risk provision on 75% of the loan amount.