The Reserve Bank of India (RBI) has asked all commercial banks to refrain from overvaluing houses while providing loans.

In a notification issued from Mumbai on Friday, RBI has noticed that some banks include stamp duty, registration and other documentation charges in the cost of the house property, thereby overstating the realisable value of the property. 

The notification adds that by following such practice, banks are consequently diluting their stipulating margins.

Accordingly, RBI has asked banks not to include these charges in the cost of the housing property they finance so that the effectiveness of loan to value norms are not diluted.