Now, banks stop giving in-principle loan sanctions on central bank directive.

Don’t be surprised if your neighbourhood banker suddenly starts asking more questions before sanctioning your housing loan.

Following a Delhi High Court order, the Reserve Bank of India (RBI) recently issued a directive asking banks to check the reasons a housing loans is being sought - particularly whether it is being sought for an authorised structure and whether it conforms to the approved building plan.

They have also been asked to ensure that the sanctioned building plan is attached to an undertaking from the loan seeker. Banks have been advised to comply with the directives with immediate effect.

According to the RBI directive, in case of an application for a loan for constructing a house, banks need to obtain a copy of the sanctioned plan from the competent authority in the name of the person applying for the loan and also seek an affidavit-cum-undertaking that the borrower shall not violate the sanctioned plan.

For a housing loan for purchase of constructed property/built-up property, banks are required to obtain from the applicant a declaration that the built-up property has been constructed in accordance with the sanctioned plan and/or building bye-laws.

Following the RBI’s directives, bankers say that they have stopped the practice of granting an in-principle credit sanction and the borrower is given an eligibility statement that, prima facie, based on credit appraisal they are eligible for a loan
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