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Master Circular on Housing Finance: Updated Guidelines for Banks

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2007-08/31 · issued 02 Jul 2007 · ~1 min read

Quick answerRBI issued a revised Master Circular on Housing Finance, consolidating all instructions up to June 30, 2007. It covers direct and indirect housing finance, priority sector loans, risk weights, and real estate exposure. Banks must align their housing loan policies with this updated circular.

What changed

The Master Circular updates the previous version dated July 1, 2006, incorporating instructions from circulars listed in the appendix and clarifications issued during the year. It consolidates all current instructions on housing finance into a single document, effective from July 2, 2007.

What it means for you

Banks now have a single reference for all housing finance guidelines, reducing ambiguity. The circular reinforces the need for orderly growth in housing loan portfolios and ensures compliance with priority sector norms. It also clarifies eligible direct and indirect housing finance activities, including second homes and rental properties.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Review and update your bank's housing finance policies to align with the revised Master Circular.
Ensure all direct and indirect housing finance activities comply with the definitions and conditions outlined.
Verify that housing loans under priority sector meet the specified criteria and reporting requirements.
Check risk weight and real estate exposure limits as per the circular's sections.

Who it affects

All Scheduled Commercial Banks (excluding RRBs)

❓ Common questions

Regulatory timeline

Stated effective date effective from July 2, 2007
Decoded by BankPulse 2026-06-19 16:09 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn 05 Aug 2026, 04:00 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What is the effective date of this Master Circular?

The circular is dated July 2, 2007, and updates instructions up to June 30, 2007.

Does this circular allow banks to finance the purchase of a plot only?

Yes, banks can finance plot purchases if the borrower declares intent to construct a house within a period set by the bank.

Are banks allowed to finance second homes or rental properties?

Yes, the circular permits finance for a second house for self-occupation and for rental properties if the borrower is posted elsewhere or has employer-provided accommodation.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)

Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)

RBI’s words: “Official withdrawal register entry #2393: DBOD.No.DIR.(HSG).BC.02/08.12.01/2007-08 — "Master Circular - Housing Finance" dated July 2, 2007”

📜 Read the original circular — full text as issued by RBI

RBI/2007-08/31
 DBOD. No.DIR. (HSG). BC.02 /08.12.01/2007-08
 July 2, 2007
 Aashadha 11, 1929 (Saka)
 All Scheduled Commercial Banks
 (excluding RRBs) 
 Dear Sirs,
 Master Circular on HOUSING FINANCE 
 As you are aware, in order to have all current instructions on a subject at one place, the Reserve Bank of India had issued a Master Circular DBOD.DIR(Exp.)No.04 /08.12.01/2006-07 dated July 1, 2006 on the captioned subject, which is now updated up to 30th June 2007. A copy of the revised Master Circular is enclosed. It may be noted that the Master Circular consolidates and updates all the instructions contained in the circulars listed in the Appendix, in so far they relate to providing bank finance to the housing sector.This Master Circular also incorporates instructions contained in certain clarifications issued by RBI to banks during the course of the year. The Master Circular has also been placed on the RBI web-site (http://www.rbi.org.in).
 Yours faithfully,
 (P. Vijaya Bhaskar)
 Chief General Manager
 Master Circular Housing Finance 
 CONTENTS 

 1.

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-08/31 · issued 02 Jul 2007. The plain-English explanation above is BankPulse’s own independent summary.

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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3645&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.