New Delhi, June 17 -- India's public sector banks (PSBs) achieved less than a third of their affordable housing loan targets for lower- and middle-income urban borrowers in the financial year 2026, underscoring challenges in scaling their small loan portfolios due to limited supply of affordable homes, tough credit checks and tedious paperwork.

State-owned banks sanctioned 191,000 loans in FY26 under the economically weaker section (EWS), low-income group (LIG) and middle-income group (MIG) urban housing categories, against a target of 643,000 loans, meeting a mere 29.5% of the goal, according to official data reviewed by Mint and two people familiar with the matter.

"The poor performance may be attributed to stringent eligibility and d...