Nevertheless, banks have uniform slabs across the country. “Banks need to have categories because of the risk weightage assigned to the size of the home loan, as directed by RBI,” said Parekh. As per current guidelines, banks have to assign a 50 per cent risk weightage to home loans of up to Rs 20 lakh. If the loan amount crosses Rs 20 lakh, the risk weightage assigned by the bank rises to 150 per cent. This raises the bank’s cost of lending to borrowers purchasing higher-priced properties.

In the light of the changed market dynamics and the much higher property prices prevailing in metros and bigger cities, a revision of the home loan slabs may be necessitated. Two years ago, Rs 20 lakh would have been a respectable amount to buy a decent sized house, even in a large city. With the property boom, prices have risen steeply.

Asked about the need to revise priority sector slabs, a senior RBI official said: “We always keep reviewing policies as per evolving situations.” In April 2007, RBI had reduced the risk weightage for home loans of up to Rs 20 lakh from 75 per cent to 50 per cent.