All banks have been directed by RBI to develop a mechanism which would allow borrowers to avail the benefit of 1% interest subsidy scheme given by government on home loans. The scheme is for borrowers taking loan upto Rs 20 lakh for buying a house.

"Banks are advised to put in place a suitable mechanism to ensure that the eligible borrowers avail of the benefit of interest subvention for one housing unit only," RBI said in a notification.

Finance minister, Pranab Mukherjee had announced in Budget 2009-10 that interest subvention of 1% of upto Rs 10 lakh for one year would be given to home loan borrowers taking loan upto Rs 20 lakh.

The scheme which was intially announced only till 30 September, 2010 has been extended till 31 March 2011.