Mumbai: Five days after Union finance minister Arun Jaitely said in his Budget that banks will be permitted to raise long term funds for lending to infrastructure sector and affordable housing with minimum regulatory pre-exemptions, the Reserve Bank of India on Tuesday issued instructions to the banks which would facilitate lending to infrastructure projects and affordable housing projects easier.
Banks can now issue long term bonds for financing infrastructure project loans and affordable housing, with regulatory pre-exemptions, such as cash reserves ratio (CRR), statutory reserves ratio (SLR) and Priority Sector Lending (PSL).
The objective of these instructions, the Reserve Bank of India said, is to mitigate the asset-liability management (ALM) problems faced by banks in extending project loans to infrastructure and core industries sectors, and also to ease the raising of long term resources for project loans to infrastructure and affordable housing sectors.
A collateral benefit of this would be the deepening of the corporate bond market, the Reserve Bank of India said. This is expected to bring down the banks’ costs by about one to two per cent.
The Reserve Bank of India has defined affordable housing loans as those eligible under priority sector lending by the RBI and also housing loans to individuals upto Rs 50 lakhs for houses of values upto Rs 65 lakhs located in the six metropolitan centres namely Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad.
For other centres it would be Rs 40 lakhs for houses of values upto Rs 50 lakhs for purchase/construction. RBI said it would periodically review the definition of affordable housing.
