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Short-term loans to housing finance cos not a priority sector lending: RBI

NEW DELHI: The Reserve Bank has said short-term loans granted by banks to housing finance companies (HFCs) for further lending to end borrowers will not be treated as priority sector lending.

The apex bank said certain scheduled commercial banks are extending short-term loans of tenure ranging from six months to one year to HFCs, and classifying the same as priority sector advances. Since, the housing loans are generally medium to long term taken by individuals, short-term loans with tenor of six months to one year granted by banks to HFCs for onlending purposes would not be same as the loans taken by the individuals. “The banks should accordingly note that if the tenor of such loans granted by them to HFCs is not co-terminus with the onlending of HFCs…. they will not be eligible for classification under priority sector lending,” it said in a notification. — PTI

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