Market Commentary

Bank Loans to HFCs to be classified under priority sector



Posted On : 2008-12-06 01:43:11( TIMEZONE : IST )

Bank Loans to HFCs to be classified under priority sector

RBI has decided that loans granted by banks to Housing Finance Companies (HFCs) for on-lending to individuals for purchase/construction of dwelling units may be classified under priority sector, provided the housing loans granted by HFCs do not exceed Rs.20 lakh per dwelling unit per family.

However, the eligibility under this measure will be restricted to five per cent of the individual bank's total priority sector lending. This special dispensation will apply to loans granted by banks to HFCs up to March 31, 2010.

Under the current guidelines, exposures to commercial real estate, capital market exposures and personal/ consumer loans are not eligible for the exceptional regulatory treatment of retaining the asset classification of the restructured standard accounts in standard category.

As the real estate sector is facing difficulties, it has been decided to extend exceptional/ concessional treatment to the commercial real estate exposures which are restructured up to June 30, 2009.

In the face of the current economic downturn, there are likely to be more instances of even viable units facing temporary cash flow problems. To address this problem, it has been decided, as a one time measure, that the second restructuring done by banks of exposures (other than exposures to commercial real estate, capital market exposures and personal/ consumer loans) up to June 30, 2009, will also be eligible for exceptional regulatory treatment.

Source : Equity Bulls

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