Banks have requested Reserve Bank of India (RBI) to allow them to classify loans given to developers of affordable housing projects as priority sector lending.
If RBI assigns priority sector tag to such loans, it would encourage developers to build affordable homes owing to availability of funding from banks. Also, it would enable banks meet their priority sector lending target, some bankers feel.
So far loan given to agriculture, micro and small enterprises, education, housing, export credit and weaker sections are considered as priority sector lending.
Further, RBI considers loans up to Rs 25 lakh to individuals in metropolitan centres and Rs 15 lakh in other centres for purchase or construction of a family dwelling unit as priority sector loans.
Individual units with a maximum carpet area of 60 sq m are classified as affordable housing projects. Further, the cost of the unit should not exceed Rs 30 lakh while the loan amount cannot exceed Rs 25 lakh.
According to RBI norms, banks are required to lend 40 per cent of their loans to priority sectors. Strong demand for housing will have a beneficial impact, creating demand for steel, cement and credit, at a time when the economy is in the midst of a slowdown.
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