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Mumbai – Reserve Bank of India (RBI) on Monday enhanced the limit on housing loans that are eligible for calculating bank’s priority sector lending targets.

The central bank issued revised norms on priority sector lending, which will come into effect from April 1.

“The enhanced coverage of the revised guidelines is expected to facilitate better targeting of bank credit to the priority sectors of the economy,” the RBI said.

However, the overall priority sector lending target remains unchanged at 40%. This means banks have to lend at least 40% of their total loans to these vulnerable segments in an attempt to facilitate flow ofcredit to these sectors . These sectors include agriculture, micro, small and medium enterprises, export credit, education, housing, social infrastructure, and renewable energy, among others. The 40% target comes with sub segments.

Under Monday's revised norms, the RBI has enhanced loan limits for several loans, including housing loans for enhanced PSL coverage. It has also broadened the purposes based on which loans may be classified under ‘renewable energy’, and expanded the list of eligible borrowers under the category of ‘weaker sections’,

Housing
Loan limits to individuals for purchase/construction of a dwelling unit per family have been increased to Rs 50 lakh from Rs 35 lakh earlier in metropolitan cities and in towns with a population below 50 lakhs to Rs 45 lakh from Rs 25 lakh earlier.

For population of town with population of 10 lakhs and below, the priority sector limit has been set at Rs 35 lakh, the RBI said.

Housing loans to banks’ own employees will not be eligible for classification under the priority sector while housing loans which are backed by long term bonds shall not be classified under priority sector, as they are exempted from inclusion in the loan book. Investments made by UCBs in bonds issued by NHB/HUDCO on or after April 1, 2007 shall not be eligible for classification under priority sector.

However, bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m and loans for affordable housing projects using at least 50% of FSI for dwelling units with carpet area of not more than 60 sq.m will be classified as priority sector.

Outstanding deposits with the National Housing Bank on account of priority sector shortfall will also be classified as priority sector.

Renewables
Bank loans up to a limit of Rs 35 crore to borrowers for renewable energy-based power generators and for renewable energy based public utilities, like street lighting systems, remote village electrification etc., will be eligible for priority sector classification. For individual households, the loan limit will be Rs 10 lakh per borrower.

Weaker section
The list for weaker sections in priority sector has been expanded to include distressed persons other than farmers, with loan amount not exceeding Rs 1 lakh per borrower to prepay their debt to non-institutional lenders. Persons with disabilities and transgenders. The limit for individual women beneficiaries has been set at Rs 2 lakh per borrower which will not be applicable for loans to women from urban co-operative banks.

Urban co-operative banks
In case of urban co-operative banks, the PSL target has been reduced to 60% from 75%. Of this, the sub-target for micro enterprises and weaker sections is at 7.5% and 12%, respectively. These banks are not permitted to lend to co-operatives of farmers, the RBI said.
https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-revises-psl-norms-enhances-cap-on-eligible-home-loans/articleshow/119434489.cms
RBI announces PSL changes target housing, renewable energy, UCB and more
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