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Macronomics: Of Risk Weights, Capital Ratios and the Fuelling of another Housing Bubble


The RBI has reduced risk weights on housing loans. This is going to create another housing bubble, primarily because it pushes banks to lend to housing versus other things. First, what did they do? The risk weights of housing loans have been cut. Housing loans are loans given to individuals to buy (or upgrade) their houses. The risk weights of such loans have been cut. This is a factor in calculating capital adequacy ratios, so technically this means banks that lend to housing suddenly "look" healthier. How much have they cut by? Here's the breakdown, by loan size and . . .

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