Mumbai: The RBI has reduced the risk weight on residential housing loans to individuals from the existing 75 per cent to 50 per cent.

Bankers say this is as an encouragement to offer housing loans up to Rs20 lakh and expect interest rates on this category of loans not to be hiked further.

According to senior bankers, this move was expected as the finance minister had also asked PSU bank chiefs in a recent meeting at Delhi to offer more small value loans (up to Rs20 lakh) without marking up their cost.

The RBI has also said risk weight on loans up to Rs1 lakh against gold and silver ornaments has been reduced to 50 per cent from the existing level of 125 per cent for all categories of banks.

Loans against gold and silver ornaments are mostly availed by the poorer sections of the society in rural and urban areas.

These loans entail relatively low risk as they are extended with adequate margins and the collateral (gold or silver) is easily marketable, particularly where the size of the loan is small, said the RBI statement.