a)     Banks are free to extend mortgage loans for construction of houses, upto a maximum period of fifteen years. The commercial banks would ensure matching of asset liability. For the purpose the commercial banks are encouraged to float long-term housing bonds of not less than 10 years maturity.

b)     While extending financing facilities to their customer, the banks would ensure that the installment of the loan extended by them  is commensurate with the cash flow and payment capacity of the borrower. This measure would be in addition to banks’ usual evaluations of each proposal concerning credit worthiness of the borrowers as also the fact that the banks’ portfolio under housing finance fulfills the prudential norms and instructions issued by the State Bank and do not impair the soundness and safety of the bank itself.

c)     Banks are encouraged to develop floating rate products for extending housing loans, thereby managing interest rate risk to avoid its adverse effects. State Bank would also encourage banks to develop in-house system to stress test their housing portfolio against adverse movements in interest rates as also maturity mismatches.

d)     Commercial banks shall ensure that at no time their total exposure under house financing exceeds 5 % of their net advances.

e)     The housing finance facility would attract a minimum debt equity ratio of 70:30

f)       The existing limit of Rs 500,000/- fixed in respect of housing finance by the banks has been enhanced immediately to Rs 5 million.

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