RBI hikes housing loan limit for priority lending to Rs25 lakh

The Reserve Bank of India (RBI) today announced an increase in the ceiling of housing loans eligible to be considered as priority sector lending to Rs25 lakh from the earlier Rs20 lakh.

This limit is applicable to all housing loans, irrespective of the location, granted to individuals for purchase / construction of dwelling unit per family, RBI said, adding that loans granted by banks to their own employees are not eligible to be considered as priority sector lending.

The revision follows an announcement made by the finance minister in Budget 2011-12, proposing an increase in priority loans to housing sector to Rs25 lakh.

The revised limit is applicable from 1 April 2011, RBI said in a release.

Loans given for repairs to damaged dwelling units of families of up to Rs1 lakh in rural and semi-urban areas and up to Rs2 lakh in urban and metropolitan areas as also loan assistance given to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers of up to a ceiling of Rs5 lakh per dwelling unit are also eligible to be considered as priority sector loans.
The norms apply to bank loans granted to housing finance companies (HFCs), approved by National Housing Bank for the purpose of refinance, for on-lending to individuals for purchase/construction of dwelling units, provided the housing loans granted by HFCs do not exceed Rs20 lakh per dwelling unit per family.

RBI has limited the eligibility under this category to five per cent of the individual bank's total priority sector lending, on an ongoing basis.

The tenor of banks' loans to housing finance companies should be coterminous with the average portfolio maturity of housing loans, up to Rs20 lakh, granted by the HFCs to the individual borrowers.

Banks should also ensure the end use of the funds lent by them to HFCs.