A major aspect of this guidance is the recommendation that a lender's analysis of repayment capacity include an evaluation of the borrower's ability to repay the debt by final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule. Continuing concerns about the subprime market led the federal regulators to issue further guidance this year regarding adjustable-rate mortgages (ARMs).
While the overall analysis, including the assessments of likely impact, made in Mid-Term Review remains valid, I would like to add a few words on what factors we are monitoring now and why we feel that extraordinary vigilance of the factors mentioned are warranted by RBI.