Home › Circulars › RBI/2007-2008/114

RRB Housing Loan Limit Doubled to Rs 20 Lakh

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2007-2008/114 · issued 13 Aug 2007 · ~1 min read

Quick answerRBI raised the housing loan limit for RRBs from Rs 10 lakh to Rs 20 lakh, irrespective of area, and removed the 5% of incremental deposits cap. This aligns RRBs with commercial banks for priority sector housing finance.

The rule, in the simplest words

RRBs (Regional Rural Banks) can now give housing loans up to Rs 20 lakh, no matter if the borrower lives in a rural or semi‑urban area.
The old rule that said such loans could only be up to 5% of the bank’s new deposits from the previous year has been removed.
Each RRB must get its Board’s approval before offering the higher‑limit loans.
This change lets RRBs compete with commercial banks and helps more people get affordable homes.

How it plays out — a real example

Sunita, a housing loan officer at an RRB in Patna, receives a request from a farmer who wants to build a new house. Because the loan limit is now Rs 20 lakh, she can approve his Rs 18 lakh loan on the spot, something she couldn’t do when the limit was only Rs 10 lakh.

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to Rs 20 lakh, and the earlier restriction limiting such loans to 5% of incremental deposits over the previous year was withdrawn.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.

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

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

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-19 15:29 IST
Status change: withdrawn 2026-07-13T04:47:15

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

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.

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

RBI/2007-2008/114 

 RPCD.CO.No RRB.BC.19 /03.05.33/2007-08

 August 13, 2007

 To

 All Regional Rural Banks

 Dear Sir,

 Priority Sector Advances- Loans for Housing Purposes 

 Please refer to our circular RPCD.PLNFS.BC.No.92/06.11.01/ 2002-03 dated April 29, 2003 in terms of which RRBs, with the approval of their Boards, were permitted to extend direct finance to the housing sector up to Rs.10 lakh in rural and semi-urban areas as part of priority sector lending. In order to bring RRBs at par with commercial banks, it has now been decided that RRBs may extend, with the approval of their Boards, direct finance to the housing sector up to Rs. 20 lakh, irrespective of the area.

 2. Further, the limit of 5 per cent of incremental deposits over previous year, prescribed vide our circular RPCD.RRB.BC. 54/03.05.33/96-97 dated October 24, 1996 also stands withdrawn.

 Yours faithfully,

 (C.S.Murthy)

 Chief General Manager-In-Charge

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-2008/114 · issued 13 Aug 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=3764&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.