Banks will be able to free more funds to lend for affordable housing as the Reserve Bank today proposed to lower the minimum risk weight on housing loans from the current 50 per cent.

"With a view to improve affordability of low-cost housing for economically weaker sections and low income groups and giving a fillip to Housing for All, while being cognizant of prudential concerns, it is proposed to reduce the risk weights applicable to lower value but well collateralised individual housing loans," the RBI said.

The minimum risk weight applicable on individual housing loans is 50 per cent, at present.

Detailed guidelines in this regard are being issued separately, the RBI said in its Fourth Bimonthly Monetary Policy statement.