Date:01/10/2005 URL: http://www.thehindubusinessline.com/2005/10/01/stories/2005100103020100.htm

Back Housing loans may be excluded from priority sector lending

Our Bureau

Mumbai , Sept. 30

HOUSING loans may no longer be eligible to be considered under the category of priority sector lending by banks.

A working group set up by the Reserve Bank of India to review the priority sector lending norms has excluded housing loans from the list of bank credit eligible under priority sector lending.

At present, loans up to Rs 15 lakh to individuals for construction of houses and Rs 2 lakh for repairs are eligible for consideration under priority sector lending.

Investments by banks in mortgage-backed securities, subject to certain conditions, have also come under priority sector lending.

According to the working group, one of the criteria for including home loans in the priority sector list is the difficulty in getting bank credit. The group believes there is no longer any difficulty in procuring housing loans and hence it need not be included in the priority sector.

In its draft report released on Friday, the group has recommended that advances to agriculture, small-scale industries, small business and education be continued under priority sector lending. However, it has recommended elimination of several categories of loans even in the afore-mentioned sectors.