Thursday, October 18, 2012

RBI guidelines on Priority Sector Lending ("PSL")

major changes in yesterday's RBI notification re revised PSL guidelines - esp for Housing Finance Companies like MHFC - see below links for more information:

Business Standard news article
Hindu news article

and the detailed RBI notification itself

but in summary, all bank loans to housing finance companies ("HFCs") — approved by the NHB for their refinance — for on-lending for the purpose of purchase, construction and reconstruction of individual dwelling units subject to an aggregate loan limit of Rs.10 lakh per borrower, would come under priority sector lending.

we hope that this does have a big impact on lending by HFCs to weaker sections - for info, all loans granted by banks to MHFC for onlending will qualify for PSL lending - with sole focus on lower income (and typicaly informal sector) families, MHFC's cap on loan amount is in any case 10 lakhs (in fact average loan today is much lower at about 4.3 lakhs).