What changed
The maximum housing loan amount eligible for priority sector classification by UCBs has been raised from Rs 20 lakh to Rs 25 lakh per family. This change applies to loans sanctioned on or after April 1, 2011, following the Union Budget 2011-12 announcement.
What it means for you
UCBs can now classify housing loans up to Rs 25 lakh (instead of Rs 20 lakh) as priority sector advances, expanding their lending scope. This allows banks to serve more borrowers under priority sector targets while supporting the government's housing push.
What you must do
- Update internal priority sector lending policies to reflect the new Rs 25 lakh limit for housing loans.
- Ensure all housing loans sanctioned on or after April 1, 2011, are classified under priority sector only if they meet the revised limit.
- Communicate the revised limit to loan origination and credit teams for accurate reporting.
- Review existing loan portfolios to reclassify eligible loans sanctioned after the effective date.
Who it affects
Primary (Urban) Co-operative Banks, Borrowers seeking housing loans up to Rs 25 lakh, Priority sector lending compliance teams
Does this circular apply to housing loans sanctioned before April 1, 2011?
No, the increased limit of Rs 25 lakh applies only to housing loans sanctioned on or after April 1, 2011. Loans sanctioned earlier remain under the old Rs 20 lakh limit.
Are loans to bank employees still excluded from priority sector classification?
Yes, loans granted by banks to their own employees are not eligible for priority sector classification, as per the existing guidelines.