Mumbai: The Reserve Bank Tuesday asked banks not to assign any risk weight to low income housing loans backed by government's credit risk guarantee fund.
"Banks may assign zero risk weight for the guaranteed portion. The balance outstanding in excess of the guaranteed portion would attract a risk-weight as appropriate to the counter-party," RBI said in a notification.
RBI also asked banks to make no provisions towards guaranteed portion if the advance covered by the trust becomes non-performing.
"In case the advance covered by Credit Risk Guarantee Fund Trust for the Low Income Housing (CRGFTLIH) guarantee becomes non-performing, no provision need be made towards the guaranteed portion," it said.
The amount outstanding in excess of the guaranteed portion should be provided for as per the extant guidelines on provisioning for non-performing advances, RBI said.
The Ministry of Housing and Urban Poverty Alleviation had set up the trust fund in June 2012 to facilitate flow of credit to low income households.
So far, a total of 29 institutions have subscribed to the trust fund.
First Published: Tuesday, April 16, 2013, 23:14