Bank Versus HFC Home Loan: How RBI's Rules Compare for Bengaluru Buyers
RBI's rulebooks for banks and housing finance companies share the same LTV caps and stamp duty exclusion, but HFC rules add a fixed three year build period for plot loans, borrower consent before payments to builders, a 60 day exit after adverse changes and a published National Housing Bank complaint route. A side by side guide for Bengaluru buyers.
Two sanction letters sit side by side on a Bengaluru buyer's table. One is from a bank, the other from a housing finance company. The rates are within a few basis points of each other and the loan amounts match. The buyer's question is no longer which is cheaper this month, but which comes with better protection over twenty years if something goes wrong.
RBI writes separate rulebooks for the two. Banks are covered by its April 1, 2025 Master Circular on Housing Finance and its Fair Practices Code guidelines, while housing finance companies follow the Housing Finance Companies Directions, 2025 and RBI's conduct Directions for non-banking lenders. This guide lines up what those texts say on the points that matter most to a home buyer. It is buyer guidance on lending rules, not a recommendation of either lender type.
The short answer. On the texts we reviewed, banks and HFCs share the same LTV caps of 90, 80 and 75 percent and the same exclusion of stamp duty from cost above Rs 10 lakh. HFC rules go further in several places: a fixed three year build period for plot loans, borrower consent before payments to the builder, a 60 day window to close or switch after an adverse change, and a published path to the National Housing Bank for complaints. Bank rules leave more to each bank's policy. The trade-off: written protections are only one input, so compare them alongside the rate, the all in cost and the lender's service record before you choose.
Are the loan to value limits the same?
Yes, on the texts we reviewed. The bank circular sets individual housing loan LTV at up to 90 percent for loans up to Rs 30 lakh, up to 80 percent above Rs 30 lakh up to Rs 75 lakh, and up to 75 percent above Rs 75 lakh. The HFC Directions say no HFC shall grant housing loans to individuals above those same limits. Both exclude stamp duty, registration and documentation charges from the property cost, except where the house costs Rs 10 lakh or less. Our earlier guide to LTV and down payment planning in Bengaluru works through the cash you need.
How do plot loans differ?
In the build deadline. The bank circular says finance for purchase of a plot can be granted provided the borrower declares an intention to construct a house on it within such period as may be laid down by the bank. The HFC Directions include plot loans in housing finance where the borrower declares an intention to construct within three years from the date of availing the loan. If you plan to hold a plot for longer before building, that difference matters.
How do disbursals to builders differ?
HFC rules add a consent step. The bank circular says disbursal of individual housing loans should be closely linked to construction stages, with no upfront disbursal for incomplete or under construction projects. The HFC Directions say disbursal shall be strictly linked to construction stages, and add that an HFC shall monitor construction progress and obtain the borrower's consent before releasing payments to the builder. The HFC Directions also say HFCs shall desist from products where builders service loan dues on borrowers' behalf. Our explainer on the HFC consent rule covers that step in detail.
How do the main protections compare?
The table puts five areas side by side. The bank and HFC columns restate the texts we reviewed; the last two columns are our practical reading.
| Area | Bank (Master Circular and Fair Practices Code) | HFC (HFC and conduct Directions) | What differs | What to ask |
|---|---|---|---|---|
| LTV and stamp duty | 90, 80 and 75 percent by loan size; stamp duty excluded above Rs 10 lakh cost | Same caps; stamp duty excluded above Rs 10 lakh cost | No difference on these texts | What will you actually sanction on my income? |
| Plot loans | Build within a period set by the bank | Build within three years of availing the loan | HFC deadline is fixed | What build period applies to me? |
| Payments to builder | Closely linked to construction stages | Strictly linked to stages, with borrower consent before release | HFC adds a consent step | How will you seek my approval before each release? |
| Changes in terms | Notice of changes; rate and charge changes only prospectively | Notice in a language you understand; prospective changes; 60 day close or switch if a change is adverse | HFC adds a 60 day exit | How will you notify me of changes? |
| Complaints | Disputes heard at least at the next higher level | Next higher level; one week acknowledgement and six week response targets; NHB route after one month | HFC timelines are spelled out | Where is your published grievance procedure? |
What about rejections, takeovers and prepayment?
Several rules line up. Both the bank Fair Practices Code guidelines and the HFC Directions say reasons for rejecting a loan application should be given in writing. Both require the existing lender to convey consent or objection to a takeover request within 21 days. For HFCs, RBI's NBFC Responsible Business Conduct Directions, 2025 bar pre-payment charges on floating rate non-business loans to individuals, and require release of original property documents within 30 days of closure, with Rs 5,000 a day compensation for delays attributable to the lender.
The bank circular's fair lending section points banks to separate RBI instructions on penal charges, release of property documents, floating rate resets and the Key Facts Statement. Those were outside the texts we compared here, so ask any bank you are considering which current instructions it applies on each.
Do property checks and recovery rules differ?
Property checks are close to identical. Both texts say that for a loan to buy a built up house or flat, the applicant should declare by affidavit-cum-undertaking that it was constructed as per the sanctioned plan and/or building bye-laws and, as far as possible, has a completion certificate, and that an architect appointed by the lender must certify plan compliance before disbursement. Both say no loan should be given for properties in unauthorised colonies unless regularised and charges paid. For construction on an owned plot, both require a sanctioned plan in the applicant's name before sanction, an undertaking to obtain the completion certificate within 3 months of completion failing which the loan may be recalled, and stage certification by the lender's architect.
Recovery conduct is spelled out in more detail for HFCs. The bank Fair Practices Code says lenders should not resort to undue harassment in recovery. The HFC Directions add specifics: recovery contact between 8.00 a.m. and 7.00 p.m., agents carrying the HFC's notice, authorisation letter and identity card, no approach to relatives or contacts other than a guarantor where required, and avoidance of occasions such as bereavements, weddings and festivals.
Which lender type suits a Bengaluru buyer?
The one that fits your situation, on paper and in practice. A buyer of an under construction flat may value the HFC consent step. A plot buyer who wants flexibility on when to build may prefer a bank whose policy sets a longer period. A buyer comparing two offers on a ready flat in a project such as Radiance in Hagadur may find the protections close enough that rate, all in cost and service decide it. Neither lender type is automatically better; the texts give you the questions to ask.
If you have been allotted a flat in a government or statutory authority scheme, both texts contain the same exception: the lender may disburse as per the authority's payment stages, even if they are not linked to construction, provided the authority has no past history of non-completion of projects. Whether either lender applies it to your allotment is its call, so ask both.
One more caution on currency. The bank circular states it consolidates instructions up to March 31, 2025 without adding new ones, while RBI's website shows the HFC Directions as updated on October 1, 2026. Ask each lender which current text governs your loan.
A practical way to use this comparison is to turn each row of the table into a written question and send the same set to both lenders before you accept either sanction. Their answers, in writing, become part of your file, and any gap between what the rulebook says and what the lender tells you is something to resolve before signing rather than after the first disbursal.
A seven-point checklist when comparing a bank and an HFC offer
- Confirm whether each lender is a scheduled commercial bank or a housing finance company.
- Compare the sanctioned amount against the 90, 80 and 75 percent LTV bands.
- For a plot, compare the build period each lender sets.
- For an under construction flat, ask how each lender approves payments to the builder.
- Ask how each will notify you of changes, and whether an exit window applies.
- Find each lender's published grievance procedure and escalation route.
- Compare all in cost and prepayment terms in writing before you sign.
Frequently asked questions
Do banks and housing finance companies follow the same LTV limits?
Yes, on the texts we reviewed. RBI's April 1, 2025 Master Circular on Housing Finance for banks and its Housing Finance Companies Directions, 2025 both cap individual housing loans at 90 percent LTV up to Rs 30 lakh, 80 percent above Rs 30 lakh up to Rs 75 lakh, and 75 percent above Rs 75 lakh.
Is the plot loan rule different for banks and HFCs?
Yes. The bank circular asks for a declaration to build within a period laid down by the bank itself. The HFC Directions include plot loans in housing finance only where the borrower declares a house will be built within three years from the date of availing the loan.
Which lender type must seek my consent before paying the builder?
The HFC Directions say an HFC shall monitor construction and obtain the borrower's consent before releasing payments to the builder. The bank circular we reviewed links disbursal to construction stages but does not contain an equivalent consent paragraph, so ask a bank directly how it approves releases.
Where do complaints go for each type of lender?
Both should hear disputes at least at the next higher level internally. For HFCs, the Directions add a one week acknowledgement target, a six week final response target, and a displayed route to the National Housing Bank's Complaint Redressal Cell if there is no response within one month.
Last updated 2026-11-03. PropNewz Team.
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