Bankers said as far as possible they were trying to increase the tenure but in a majority of cases the extended term of the home loan was exceeding the working life of the borrower. Canara Bank chairman and managing director S Raman said in most cases the lender was extending the term to 65 years.

Asked about what SBI was doing, the bank's chairman, Pratip Choudhuri, said that the country's largest bank was analysing the government's circular as the lender was itself trying to ensure that borrowers were not impacted. "We are trying to see how we can implement for loans which are security based such as housing loans," added SBI managing director A Krishna Kumar.

In most cases, banks, apart from factoring in the maximum tenure of 20 years, had also linked it to the working age, which is 60 years for most banks. Following the government advisory, this has been raised to 65 years.

For banks it makes sense to increase the tenure since the interest income goes up. For someone who had borrowed Rs 50 lakh at 9% for 20 years, the EMI worked out to Rs 44,985. But with rates rising to 10.5% or thereabouts, the installment, keeping the tenure constant, now works out to Rs 49,919 a month, which represents an increase of 11% in a span of 15 months or so.

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If the borrower wants to retain the EMI at Rs 44,985, the only option he has is to increase the tenure to 413 installments or 34-and-a-half years, which most banks are unlikely to provide. Apart from everything else, it would roughly equal the working life of most borrowers. But with the government advisory, banks would be more amenable to increase the term though not to over 34 years. The flip side is that the interest burden, which would have been around Rs 58 lakh with a 240-month term, would rise to Rs 1.36 crore if the tenure goes up to 34 years.