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Priority sector status for housing loans

MUMBAI: In order to increase the flow of funds to the sagging real estate sector, the Reserve Bank of India on Saturday announced a slew of measures, including a Rs. 4,000-crore refinance facility for the National Housing Bank and the priority sector status for housing loans up to Rs. 20 lakh.

“We are working on a refinance facility for the National Housing Bank (NHB) of an amount of Rs. 4,000 crore,” RBI Governor D. Subbarao said. According to current norms, a bank has to set aside 40 per cent of its deposits for lending under the priority sector head.

The RBI said banks can classify housing loans up to Rs. 20 lakh as “priority sector” advances, subject to a ceiling of five per cent of their total priority sector target.

Loans by banks to housing finance companies (HFCs) for on-lending to individuals for purchasing or constructing dwelling units may be classified under the priority sector, provided the housing loans granted by HFCs do not exceed Rs 20 lakh per dwelling unit per family, the statement said. The special dispensation for treating loans to HFCs as priority sector advances will boost lending to the housing sector, Dr. Subbarao said, adding that this would apply to loans granted by banks to HFCs up to March 31, 2010. The RBI has also relaxed asset classification norms for commercial real estate advances to encourage banks to raise their exposure to the sector. — PTI

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