The policymaking Monetary Board has excluded loans to infrastructure projects from a cap on real estate lending imposed on banks, “rationalizing” the limits on the exposure of universal and commercial banks to the property sector to encourage lenders to pour in more money into public projects and housing.
The board allowed a single 20% overall limit on banks’ real estate lending. The new limit, which primarily serves as a safeguard against too much commercial lending, is expected to provide banks with more flexibility in delivering credit to ’high-priority” areas such as infrastructure development and the construction of residential properties.
Under the new rules, loans for the construction of public infrastructure are now excluded from the definition of real estate loans, and consequently from the 20% loan limit.