What changed
This master circular updates and consolidates all housing finance instructions for UCBs issued up to June 30, 2011, replacing the previous July 1, 2010 circular. It reiterates existing guidelines without introducing new policy changes, serving as a single reference document.
What it means for you
UCBs can continue housing lending from own resources, with board-approved loan limits and margins, subject to maximum per-beneficiary caps (Rs.25 lakh for Tier I, Rs.50 lakh for Tier II) and exposure limits (15% capital funds for individuals, 40% for groups). Priority sector benefits apply for loans to specified categories up to prescribed limits, encouraging social lending. Bigger banks with surplus funds can expand housing finance as a profitable avenue.
What you must do
- Review and update internal housing loan policies to align with this master circular's terms and conditions.
- Ensure board approval for maximum loan amounts and margins as per commercial judgement.
- Classify housing loans to eligible weaker sections as priority sector advances up to prescribed limits.
- Obtain general permission from Registrar for financing housing societies, if not already done.
- Maintain documentation of all instructions consolidated in this circular for audit compliance.
Who it affects
Primary (Urban) Co-operative Banks (UCBs), Borrowers: individuals, co-operative housing societies, housing boards, Weaker sections: economically weaker sections, low and middle income groups
What categories of borrowers are eligible for housing loans under this circular?
Eligible borrowers include individuals, co-operative/group housing societies, housing boards for EWS/LIG/MIG projects, and owners for house extension or major repairs.
Are housing loans to weaker sections treated as priority sector?
Yes, housing finance to specified categories up to prescribed limits is treated as priority sector lending, consistent with social objectives.
Do UCBs need special permission for each housing society loan?
No, RBI suggests banks obtain general permission from the Registrar to finance housing societies, subject to prescribed terms and conditions.