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Our Bureau

`This is a social banking objective and the demand for such loans will rise'.

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Mumbai Feb. 28 Weaker sections of the society will now be able to access housing loans of Rs 20,000 at just four per cent. While some bankers feel the financial inclusion of the poor will have only a negligible impact on their balance sheets, others maintain it could trigger a strong demand straining a tight resources position.

Under the "Differential Rate of Interest (DRI) scheme" banks provide finance at a rate of four per cent to the weaker sections of the community engaged in gainful occupations. The Union Budget has proposed to raise the limit of the loan from Rs 6, 500 to Rs 15, 000 and that of the housing loan from Rs 5,000 to Rs 20,000 per beneficiary.

"It is a part of a social commitment towards weaker sections of the society and now there will be greater lending opportunities," said Mr M.B.N. Rao, Chairman and Managing Director, Canara Bank.

Banks have to lend one per cent of their net credit under the DRI scheme. However, most of the banks have lent only half per cent (.50 per cent) of their net bank credit till date"It is going to hit the banking system badly. Now, the demand will move up and the banks have to lend one per cent of their net bank credit to the weaker sections at four per cent. It will tell on costs," said the chairman of a public sector bank.

Currently banks offer agricultural loans at seven per cent and now will have to serve up housing loans at four per cent.

"It is a social banking objective and the demand for such loans will show an increase. However, since the quantum of such loans is miniscule the costs will not be majorly affected," said Mr V. Sridhar, Chairman and Managing Director, UCO Bank.

More Stories on : Budget | Housing Finance | Social Welfare

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