The move has been initiated following the decision taken by RBI to allow banks to raise long-term resources to fund affordable housing.
The money raised through bonds will not attract the cash reserve ratio and statutory liquidity ratio norms, thereby lowering the cost of funds for banks.
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According to present RBI norms, loans of up to INR5m for a property worth up to INR6.5m in six cities – Mumbai, New Delhi, Chennai, Kolkata, Bangalore and Hyderabad – and up to INR4m in other centers, will now be eligible for affordable housing.
Pralay Mondal, the bank’s senior group president (retail and business banking), said that the average size for mortgage loans will be nearly INR3.5m.
"With the new infrastructure bonds, one can effectively work like a housing finance company. Even if you give the loan at the base rate, you still have a margin to play as 30 per cent of it will qualify for priority-sector lending. It is a strategic product for us and it makes immense sense to get into it right now," added Mondal.
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