What changed
The earlier ceiling of ₹1 lakh in rural/semi-urban areas and ₹2 lakh in urban areas for individual housing repair loans has been doubled and more. The new limits are ₹2 lakh for rural/semi-urban and ₹5 lakh for urban areas. Loans under these enhanced limits continue to qualify as priority sector advances.
What it means for you
UCBs can now offer larger home improvement loans to individuals, potentially increasing their priority sector lending portfolio. The overall caps on housing, real estate, and commercial real estate loans (10% of total assets) and the additional 5% limit for housing loans up to ₹25 lakh remain unchanged, so banks must manage within those boundaries.
What you must do
- Update internal loan policy and sanction limits for home repair loans to reflect new ceilings of ₹2 lakh (rural/semi-urban) and ₹5 lakh (urban).
- Ensure these loans are classified under priority sector advances as per RBI guidelines.
- Monitor the combined housing, real estate, and commercial real estate exposure to stay within the 10% of total assets cap.
- Communicate the revised limits to branch heads and credit officers for consistent implementation.
Who it affects
Primary (Urban) Co-operative Banks, Individual borrowers seeking home repair loans, Priority sector lending teams at UCBs
Are the enhanced repair loans still eligible for priority sector classification?
Yes, loans granted under the new limits for repairs, additions, or alterations to dwelling units continue to be eligible for classification under priority sector.
Do the overall housing loan exposure caps change with this circular?
No. The combined ceiling for housing, real estate, and commercial real estate loans at 10% of total assets, and the additional 5% limit for housing loans up to ₹25 lakh, remain unchanged.
What were the previous limits for home repair loans?
Earlier, the ceiling was ₹1 lakh in rural and semi-urban areas and ₹2 lakh in urban areas, as per the circular dated December 30, 2002.