What changed
The maximum housing loan amount per family that qualifies as priority sector lending was increased from Rs 20 lakh to Rs 25 lakh. This change applies to loans sanctioned on or after April 1, 2011, and is based on the Union Finance Minister's budget announcement for 2011-12.
What it means for you
Banks can now classify a larger portion of their housing loan portfolio under priority sector, helping them meet priority sector lending targets more easily. This also expands affordable housing access for borrowers, as loans up to Rs 25 lakh for purchase or construction of a dwelling unit per family now qualify.
What you must do
- Update internal priority sector lending policies to reflect the new Rs 25 lakh limit for housing loans.
- Ensure housing loans sanctioned from April 1, 2011 onward are classified under priority sector only if they meet the revised limit.
- Communicate the change to loan origination and credit teams to avoid misclassification.
- Review existing loan applications pending sanction to apply the new limit correctly.
Who it affects
All scheduled commercial banks (excluding Regional Rural Banks), Retail lending teams handling housing loans, Priority sector compliance and reporting departments, Borrowers seeking housing loans up to Rs 25 lakh
Does this change apply to housing loans sanctioned before April 1, 2011?
No, the increased limit of Rs 25 lakh is applicable only to housing loans sanctioned on or after April 1, 2011.
Are loans to bank employees still excluded from priority sector classification?
Yes, the circular specifies that loans granted by banks to their own employees are not eligible for classification under priority sector, even if they meet the new limit.