Punjab National Bank has entered into an understanding with state housing department authority to extend housing loans to economically challenged sections of the society.

Under the agreed terms, the bank will provide loans to lower income group and economically weaker sections.

The bank has already signed MOU with some of the state development authorities, which include Gorakhpur, Varanasi, Lucknow, Meerut, Moradabad, Hapur and Allahabad.

In a statement bank said, "The main points which were covered in the MoU were execution of tripartite agreement with the allotee, creation of customer help desks by PNB at allotment office of LDA, expeditious and prompt sanctioning of loans to allottee and sharing of allottee database between two organisations."

The benchmark lending rate of PNB is currently pegged at 11 percent which is lowest in the industry.

Earlier, in a similar move Central Bank of India approved disbursal of home loans proposal by Ahmedabad Municipal Corporation for development of low-cost housing units for urban poor. Under the scheme, named as ‘Interest Subsidy Scheme for Housing the Urban Poor (ISSHUP)', a total loan amount of Rs 120 crore was sanctioned.

The Union budget 2009-10 has proposed an allocation of Rs. 2,000 crore to National Housing Bank to enable housing finance companies (HFCs) to get low-cost funds. This is expected to boost low cost housing in India.