Interest rates and prudential norms together help home loan quality: Research
interest rate alone may not help with the repayments by home loan borrowers. Prudential measures like risk weights and loan to value adjustments along with interest rate are more effective in repayments of loans and help in housing credit growth as well as controlling the asset quality of banks' home loan portfolio, a research paper supported by the Reserve Bank shows.
«Banks’ capital adequacy had a positive impact on housing credit growth. Macro prudential policies and monetary policies were more effective when used in tandem. Macro prudential policies were not weakened by business cycle booms. While macro prudential policy alone did not seem to affect housing sector NPAs, tighter Macro prudential and monetary policies in conjunction could help to reduce the NPA ratio in the housing sector» said a research paper titled " Assessing the Impact of macro-prudential Policies on Housing Credit Dynamics: Evidence from India"
The research paper written is jointly by Amar Nath Yadav, Vivek Kumar and Jyoti Kumari of the Reserve Bank of India's Department of Statistics and Information Management and the external contributor Alok Kumar Chakrawal, vice-chancellor of Guru Ghasidas Vishwavidyalaya, Chhattisgarh. The views expressed are not necessarily of the central bank.
The paper evaluates the impact of macro prudential policies exclusively on the housing sector, which is one of the largest segments of retail credit in India and assesses their impact on housing credit growth and non-performing assets (NPA) using bank-level
