Banks must lend more: NHB

National Housing Bank (NHB) will request RBI to encourage banks to lend more to housing finance companies (HFCs) under priority sector status.

Loans classified as priority sector are cheaper than normal rates. Banks offer around 100 basis points discount for its priority sector loans to housing finance companies.

Banks give indirect housing loans to HFCs for on-lending to individuals. At present, such loans up to Rs5-lakh have been classified as priority sector lending. NHB plans to suggest the central bank to raise the ceiling to at least Rs10-lakh.

NHB, which is wholly owned by RBI, is the central agency for promoting and regulating housing finance companies. It intends to push the Rs10-lakh cut-off as the government offers 1 per cent interest subvention on housing loans up to Rs10-lakh.