RBI tightens priority sector norms for bank loans to housing finance companies
19 Dec 2009
The Reserve Bank of India (RBI) has limited the amount of loans granted by banks to housing finance companies (HFCs) eligible to be classified under priority sector lending to five per cent of the individual bank's total priority sector lending, on an ongoing basis.
This will be applicable to loans granted by banks to HFCs up to 31 March 2010, RBI said in a release.
The RBI also said short-term loans with tenors of six months to one year, granted by banks to HFCs for on-lending purposes, will not be eligible to be classified as priority sector loans as these would not be co-terminus with the loans taken by individuals.
Housing loans taken by individuals are generally of medium to long-term in nature, RBI pointed out.
The RBI had, on 1 July 2009, issued a circular to commercial banks on priority sector lending, in terms of which refinance granted by them to housing finance companies approved by the National Housing Bank, for on-lending to individuals for purchase/construction of dwelling units were eligible to be classified under priority sector lending, provided the housing loans granted by HFCs did not exceed Rs20 lakh per dwelling unit per family.
"It has been brought to the notice of the Reserve Bank that certain scheduled commercial banks are extending short-term loans of tenure ranging from six months to one year to housing finance companies (HFCs), and classifying the same as priority sector advances," RBI said in its release.
