After Reserve Bank of India (RBI) announced the hike in limits for cheaper loan for affordable housing to Rs 35 lakh under priority sector lending (PSL), Sudhin Choksey, Managing Director, Gruh Finance, expect more benefits to banks than housing finance companies (HFC) and non-banking financial companies (NBFC).

When the banks lend to NBFCs or HFCs, it comes under indirect lending and there the limit is still Rs 10 lakh.

However, given the limit has been extended for the banks, it's also likely to go up for HFCs and NBFCs.

As of now, this development would only increase and intensify the competition on the pricing front for HFCs and NBFCs, when banks enter into affordable housing segment.

The RBI yesterday asked banks to strengthen their screening and follow up with respect to small ticket size lending of up to Rs 2 lakh, where non-performing assets (NPAs) were high.

Responding to the above, Choksey said, which property a family can buy with loan of Rs 2 lakh, especially in cities. So this could be repair loans or extension loans.

The average ticket loan for Gruh Finance on incremental basis is around Rs 9.5 lakh and on outstanding loans it's around Rs 7-7.5 lakh, he said.

The incremental borrowing costs have gone up by 25-30 basis points and they have not passed on the increase in cost to customers, he said, adding that they would look at this aspect in the asset-liability committee (ALCO) meeting and take a call.

So there will be pressure on spreads and net interest margins if costs are not passed on, Choksey added.

In FY18, the company had raised significant amount of money from bond market due to attractive rates, he said.