What changed
The per-loan cap for direct housing finance by RRBs under priority sector was increased from Rs 10 lakh to Rs 20 lakh, and the earlier restriction limiting such loans to 5% of incremental deposits over the previous year was withdrawn.
What it means for you
RRBs can now offer larger housing loans without the earlier deposit-linked ceiling, enabling them to compete more effectively with commercial banks in rural and semi-urban markets. This expands their priority sector lending portfolio and supports affordable housing goals.
What you must do
- Update board-approved housing loan policy to reflect the new Rs 20 lakh limit across all areas.
- Remove internal caps tied to the old 5% of incremental deposits rule from lending guidelines.
- Train credit officers on the revised eligibility and documentation requirements for higher loan amounts.
- Review and adjust risk assessment frameworks for housing loans up to Rs 20 lakh.
Who it affects
Regional Rural Banks, Rural and semi-urban borrowers seeking housing finance, Priority sector lending compliance teams at RRBs
Does the Rs 20 lakh limit apply only to rural areas?
No, the circular states the limit is irrespective of area, so it applies to rural, semi-urban, and urban locations served by RRBs.
Is board approval still required for housing loans under this circular?
Yes, RRBs must obtain board approval to extend direct housing finance up to Rs 20 lakh, as per the circular.
What happens to the old 5% of incremental deposits limit?
That limit has been withdrawn entirely, so RRBs are no longer constrained by it when sanctioning housing loans.