Govt to raise 5% interest subvention scheme by 5-fold for poor

In a move to make finance cheaper for weaker sections of the society, the government will soon be massively expanding the eligibility cap for the 5% interest subvention scheme to Rs 5 lakh from the current Rs 1 lakh, a top official said today.

"The eligibility limit (for 5% interest subvention) will be increased to Rs 5 lakh from the present Rs 1 lakh. The new interest subsidy scheme will be announced soon," Financial Services Secretary G S Sandhu said while addressing a realty summit organised by the industry body Nardeco here.

Earlier, addressing the same gathering, RBI deputy governor S S Mundra said housing shortage is very severe among the weaker sections, and pointed out to the findings of an RBI internal panel which say over 58% of people from the economically weaker sections and over 39% from the low income groups do not have access to housing.

Under the subvention scheme, the government shares the interest burden on a loan for the particular target segment and such schemes exist of a slew of sectors, including the agriculture.

Sandhu said the government has to ensure that financing is available at affordable prices and conceded that commercial banks have a limitation due to cost of funds.

"The banks cannot go below their cost of funds and to make credit cheaper, the government has to give the interest subsidy," he explained.

Meanwhile, Sandhu also said the government will soon be coming out with a blueprint of its affordable housing policy.

"The leadership is very clear about its aim of having results in a time-bound manner. We are having deliberations on the scheme at present and will come out with an affordable housing policy soon," he said.

He further said the Centre and the states, financial institutions, developers and local bodies are important stakeholders who will have to play their role in making the proposed initiative a success.