mumbai cooperative banks will find it much easier to extend home loans in the future if the loans are for only a small portion of the property value the reserve bank of india rbi has linked the risk weight on home loans provided by cooperative banks to the loantovalue ratio of the advance extended hence for home loans up to rs 30 lakh and below 75 of the value of the property banks will need to set aside only 50 of the capital they are required to maintain earlier if the loan is for more than rs 30 lakh in absolute terms but still less than 75 of the property value the capital requirement will be 75 of standard requirement however if the bank provides loans for more than 75 of the value of the property there is no relief in capital adequacy requirementfor banks the amount of capital they are required to set aside for each loan is decided by the minimum capital adequacy ratio prescribed by the central bank capital adequacy ratio is the ratio of a banks net worth to its riskweighted credit exposure the risk weightage in turn is the ratio which determines the credit risk in a particular loan asset although capital adequacy ratio is fixed at a flat 10 for banks rbi reduces the capital requirement by increasing or reducing the risk weightage for loans in certain sectors for instance for home loans up to rs 30 lakh the risk weightage on the loan is 50 what this means is that banks will need to set aside only 50 of the capital they keep aside for loans with a 100 risk weightagerbi increases or reduces the risk weightage depending on its perception of risk in a particular sector the higher risk weightage reduces the banks loss in the event of a default it also discourages lending to that sector by making it more capital intensivethe central bank has also relaxed branch and atm licencing for cooperative banks subject to their maintenance of a minimum crar of 10 on a continuous basis the cooperative banks also needs to have net npas of less than 10 and should have made a profit in the preceding year