RBI Circular on Mortgage Guarantee Companies – Dec 2011
Current · Source: Reserve Bank of India · RBI/2011-12/302 · issued 16 Dec 2011 · ~1 min read
Quick answerRBI issued a circular on December 16, 2011, amending the Mortgage Guarantee Company Guidelines 2008 to reduce the maximum LTV ratio for mortgage guarantees on housing loans above Rs. 20 lakh from 90% to 80%, while maintaining a 90% cap for loans up to Rs. 20 lakh.
The rule, in the simplest words
For home loans above Rs. 20 lakh, the guarantee company cannot cover more than 80% of the loan-to-value (LTV, how much loan vs the house's price).
For home loans up to Rs. 20 lakh (called 'priority sector' loans for small borrowers), the guarantee company can cover up to 90% LTV.
Banks and housing finance companies must check that their guarantee partners follow these LTV limits.
How it plays out — a real example
An agri & priority-sector lending officer in Indore is processing a home loan of Rs. 25 lakh. She checks the mortgage guarantee company's policy and sees the LTV cap is 80% for loans above Rs. 20 lakh, so she ensures the guarantee covers no more than Rs. 20 lakh (80% of Rs. 25 lakh). For a smaller loan of Rs. 15 lakh, she knows the cap is 90%, so the guarantee can cover up to Rs. 13.5 lakh.
What changed
RBI amended paragraph 27 of the Mortgage Guarantee Company Guidelines 2008, lowering the permissible LTV ratio for mortgage guarantees on housing loans exceeding Rs. 20 lakh from 90% to 80%. For housing loans up to Rs. 20 lakh (priority sector), the LTV cap remains at 90%.
What it means for you
Mortgage guarantee companies can no longer guarantee housing loans above Rs. 20 lakh with an LTV ratio exceeding 80%. For smaller loans (up to Rs. 20 lakh), the LTV cap is 90%. Banks and HFCs must ensure their mortgage guarantee partners comply with these revised LTV limits.
What you must do
Ensure mortgage guarantee partners do not provide guarantees for housing loans above Rs. 20 lakh with LTV exceeding 80%.
Verify that guarantees for housing loans up to Rs. 20 lakh comply with the 90% LTV cap.
Update internal policies to reflect the revised LTV thresholds for mortgage guarantee recognition.
Who it affects
Mortgage Guarantee Companies, Banks offering home loans, Housing Finance Companies
❓ Common questions
What is the purpose of this circular?
To amend the Mortgage Guarantee Company Guidelines 2008 by reducing the maximum LTV ratio for mortgage guarantees on housing loans above Rs. 20 lakh from 90% to 80%, aligning with commercial bank norms.
Does this circular affect home loan borrowers directly?
No, it is directed at mortgage guarantee companies and lenders, not individual borrowers.
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/302
DNBS (PD-MGC) CC. No. 10/03.11.01/2011-12
December 16, 2011
To
The Chairman/CEOs of all Mortgage Guarantee Companies
Dear Sir
Amendment to Mortgage Guarantee Company (Reserve Bank) Guidelines, 2008
Please refer to Para 27 of the Mortgage Guarantee Company (Reserve Bank) Guidelines 2008 issued vide Notification DNBS(PD)MGC No.3 /CGM (PK) - 2008 dated February 15, 2008 wherein it has been stated that no mortgage guarantee company shall provide mortgage guarantee for a housing loan with 90% and above LTV ratio. As scheduled commercial banks are expected to seek mortgage guarantee for their housing loans, it has been decided to align the regulatory prescription of LTV ratio for mortgage guarantee companies with that of commercial banks and revise it downwards from 90% to 80% for housing loans exceeding Rs. 20 lakhs. However for small value housing loans i.e housing loans up to Rs. 20 lakh (which get categorized as priority sector advances), LTV ratio should not exceed 90%.
2. Copy of amending Notification No. DNBS (PD) MGC No. 6 / CGM (US)-2011 dated December 16, 2011 amending Mortgage Guarantee Company (Reserve Bank) Guidelines 2008 is enclosed for meticulous compliance.
Yours faithfully
(Uma Subramaniam)
Chief General Manager-In-Charge
Enclosures as above
RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING SUPERVISION
CENTRAL OFFICE
CENTRE I, WORLD TRADE CENTRE,
CUFFE PARADE, COLABA,
MUMBAI 400 005.
Notification DNBS (PD) MGC No. 6 / CGM (US)-2011 dated December 16, 2011
The Reserve Bank of India, having considered it necessary in public interest and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to amend the Mortgage Guarantee Company (Reserve Bank) Guidelines 2008 in exercise of the powers conferred by sections 45JA and 45 (L) of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby directs that the said Directions shall be amended with immediate effect as follows, namely -
2 . Amendment of paragraph 27 –
The existing clause "No mortgage guarantee company shall provide mortgage guarantee for a housing loan with 90% and above LTV ratio" shall be substituted with the following " No mortgage guarantee company shall provide mortgage guarantee for a housing loan above Rs. 20 lakhs where the LTV exceeds 80%." For s mall value housing loans i.e housing loans up to Rs. 20 lakh (which get categorized as priority sector advances), LTV ratio should not exceed 90%.
Yours faithfully
(Uma Subramaniam)
Chief General Manager-In-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/302 · issued 16 Dec 2011. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (Mortgage Guarantee Companies, Banks offering home loans, Housing Finance Companies), your first concrete step on “RBI Circular on Mortgage Guarantee Companies – Dec 2011” is: “Ensure mortgage guarantee partners do not provide guarantees for housing loans above Rs. 20 lakh with LTV exceeding 80%.” (RBI issued this 16 Dec 2011).
Circular: RBI/2011-12/302 -- RBI Circular on Mortgage Guarantee Companies – Dec 2011
Issued: 16 Dec 2011
Action required: Ensure mortgage guarantee partners do not provide guarantees for housing loans above Rs. 20 lakh with LTV exceeding 80%.
Action required: Verify that guarantees for housing loans up to Rs. 20 lakh comply with the 90% LTV cap.
Action required: Update internal policies to reflect the revised LTV thresholds for mortgage guarantee recognition.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 03 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=6874&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.
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