Banks seek home loans leeway

Banks are hoping that the Reserve Bank of India will spell out norms to distinguish lending for commercial housing and self-use housing units in its credit policy.

"Banks have conveyed to the ministry and the RBI that they want more specific norms regarding lending to housing sector. It is entirely up to RBI whether it incorporates any of these suggestions in its policy," a finance ministry official said.

Banks had made several suggestion including restricting concessional lending to first time owners of a dwelling unit.

"If the loan is being sought for a second house then a higher interest rate should be charged since the second home is usually obtained for re-sale at a later date or for putting it on rent," the official said.

Another suggestion was to link concessional lending to the liability of the individual.

"If the liability is higher than a benchmark, then the concessional lending would not apply beyond that threshold limit," the official said.