In the quest to provide shelter, a fundamental human need, the government introduced the Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) in 2015. This initiative aimed to assist the urban poor in owning their homes by providing them with interest subsidies. Here’s an in-depth look at how this scheme evolved, its impact, and a comparison of the old and new versions.
What is CLSS?
The Credit Linked Subsidy Scheme (CLSS) is a government initiative that helps low and middle-income groups secure home loans by offering them an interest subsidy. Initially launched in 2015, the scheme caters to the economically weaker sections (EWS), lower-income groups (LIG), and middle-income groups (MIG) living in urban areas.
Under CLSS, eligible families can avail of a subsidy on the interest paid on home loans, which makes homeownership more affordable. The subsidy is provided by the government through various financial institutions, such as banks and housing finance companies (HFCs).
Achievement of CLSS:
As of November 25, 2024, here are the impressive numbers that highlight the success of PMAY-U:
- 1.19 Crore houses sanctioned under PMAY-U.
- ₹1.66 Lakh Crore released as part of the scheme.
- ₹58,868 Crore released under CLSS.
CLSS Process – How It Works
To avail the benefits of CLSS, the process is as follows:
- Eligibility: The scheme targets families from EWS, LIG, and MIG categories. The eligibility is based on income levels, with specific limits for each group.
- Loan Amounts: The loan amounts vary based on the group. EWS and LIG families can borrow up to ₹6 lakh, while MIG families can avail loans up to ₹9 lakh for MIG-1 and ₹12 lakh for MIG-2.
- Interest Subsidy: The government offers a maximum interest subsidy of ₹2.67 lakh for EWS and LIG, and a lesser subsidy for MIG groups.
- Submission of Claims: Claims for subsidy are processed through the CLSS Awas Portal (CLAP), which is used by Primary Lending Institutions (PLIs) to upload subsidy claims.
- Subsidy Impact: The subsidy is credited to the beneficiary’s loan account, which reduces the loan principal. The EMI is adjusted accordingly, ensuring the borrower pays less overtime.
CLSS vs CLSS 2.0 Processes
Aspect | CLSS (Credit Linked Subsidy Scheme) | CLSS 2.0 (Credit Linked Subsidy Scheme 2.0) |
Customer Application | Customer applies to Primary Lending Institution (PLI) along with a self-declaration. | Customer applies directly to the Central Nodal Agency (CNA) through CLAP (Common Lending Application Portal) with details like Pradhan Mantri Awas Yojana (PMAY) vertical, family, income, and preferred PLI. |
Due Diligence (DD) | Conducted by the PLI as per product policy and reviewed/audited as per CLSS guidelines. | Conducted by the PLI as per product policy and eligibility based on submitted documents. |
ID Generation | CLAP ID generated by CNA based on Aadhaar numbers and deduplication of family details. | ISS (Interest Subsidy Scheme) ID generated by CNA post deduplication and communicated to the borrower. |
Data Submission | PLI uploads data to CNA, and CNA performs due diligence on the submitted pool for subsidy approval. | Similar process: PLI uploads data to CNA, which conducts due diligence on the submitted pool. |
Subsidy Release | Subsidy released by CNA to the PLI. | Same process: Subsidy released by CNA to the PLI. |
Benefit Transfer to Borrower | Subsidy transferred to the borrower via part-payment within 15 days of receipt. | Faster process: Subsidy transferred via part-payment within 7 days of receipt. |
The Evolution: CLSS 1.0 vs. CLSS 2.0
The CLSS 2.0 scheme, introduced in September 2024, brought about several key changes to improve the accessibility and ease of the process. Let’s take a look at the comparison between the original CLSS scheme and the updated CLSS 2.0:
Sr.no | Bucket | CLSS original circular | CLSS 2.0 circular (ISS) |
1 | Classification basis annual household income | Economic weaker section (EWS-3), Lower income group (LIG-3-6), Middle income group (MIG 1 -6-12, MIG2 – 12-18). | EWS (3), LIG (3-6) & MIG (6-9). |
2 | Maximum subsidy amount | Rs 2,67,200 | Rs 1,50,000 |
3 | Construction | Maximum 36 months from the date of 1st disbursement, construction to be completed. | Before release of 4th installment, construction status to be shown as completed. |
4 | Release of subsidy | FIFO basis by CNA. (Basis fund availability) | 5 yearly instalments. |
5 | Unique I’d | CLAP I’d is generated by PLI’s while uploading claims to portal. | ISS I’d is generated by borrower directly at CLAP & then application is moved to PLI as per preference. |
6 | TAT for uploading claims | No TAT for uploading claims to CNA. Generally on a quarterly/half yearly basis, claims get uploaded. | Within 30 days of disbursement, claim to be uploaded to CNA by PLI. |
7 | Balance transfer (BT) | If borrower has taken benefit under PMAY-U and switches on to another PLI through BT, then he shall not be eligible. | Balance transfer cases are not eligible under CLSS even though benefit not taken in earlier PLI |
8 | Ineligibility | – |
|
9 | Processing fees | Max Rs. 3,000 will be refunded to PLI’s. | Max Rs. 4,000 will be refunded to PLI’s. |
10 | Carpet area | Different carpet area up to 30 sq., 60 sq., 160 sq., 200 sq. as per EWS, LIG, MIG 1, MIG 2. | Maximum carpet area up to 120 sq. |
11 | Discounting rate | NPV rate – 9%. | NPV rate – 8.5%. |
12 | Impact of Subsidy | Within 15 days of receipt of the Subsidy benefit needs to be passed on to the borrower. | Within 7 days of receipt of the Subsidy benefit needs to be passed on to the borrower. |
13 | Geo-tagging | Required for progress monitoring in limited stages and verticals. | Geo-tagging is required for five construction stages in all verticals. |
14 | Interest Subsidy | Subsidy based on income and carpet area. | Revised limits on loan value (up to ₹25 lakh) and house value (₹35 lakh). |
15 | Beneficiary Criteria | Income-based, exclusion of those with existing pucca houses. A Beneficiary should avail benefit under one scheme only. | Stricter exclusions for previous beneficiaries under any housing scheme in 20 years. |
16 | House Value Limit | Not specified under PMAY-U 1.0 guidelines. | Ensures benefits target genuinely affordable housing. |
Conclusion:
The evolution from CLSS to CLSS 2.0 brings significant improvements to streamline processes and ensure fairer, more efficient allocation of subsidies. Key changes, such as stricter beneficiary eligibility and faster subsidy disbursement timelines, aim to enhance transparency and equity. The use of centralized systems like the Common Lending Application Portal (CLAP) for direct application and ISS ID generation eliminates repetition and ensures faster processing, benefiting borrowers with quicker access to reduced loan principals. Enhanced monitoring through geo-tagging and stricter timelines for subsidy claim submissions also make the system more accountable, benefiting stakeholders, including financial institutions, government agencies, and beneficiaries.
These changes, however, introduce stricter controls that may limit eligibility for some stakeholders. For example, the reduced maximum subsidy amount and narrower income group classifications may exclude potential beneficiaries, especially in the MIG categories. Stricter exclusion criteria for beneficiaries with prior housing scheme benefits and limits on house values ensure subsidies are directed toward genuinely affordable housing. Overall, CLSS 2.0 strikes a balance between accessibility, efficiency, and ensuring benefits reach the intended socio-economic groups, improving its overall impact on affordable housing initiatives in urban India.
Disclaimer:
The information provided in this article is for educational and informational purposes only. While every effort has been made to ensure accuracy, readers are encouraged to refer to the latest Reserve Bank of India (RBI) guidelines and consult with qualified professionals for specific advice related to currency chest operations and compliance requirements. The examples and stories included are illustrative and may not represent actual events.