RBI Revises Loan Norms for Urban Co-operative Banks

The Reserve Bank of India has adjusted norms for Urban Co-operative Banks, allowing greater freedom with a 25% cap on housing loans. Other real estate exposure is limited to 5%. The move aims to enhance operational flexibility without compromising prudential standards.

The Reserve Bank of India (RBI) announced on Monday a significant shift in norms for Urban Co-operative Banks (UCBs) concerning housing loans and real estate exposure. Aimed at offering greater operational liberty, the new guidelines stipulate that the aggregate exposure of UCBs to residential mortgages should not surpass 25% of their total loans and advances.

Previously, UCBs had a cap of 10% on housing, real estate, and commercial real estate loans, which could be extended by an additional 5% for individual housing loans. The revised norms provide these banks with enhanced flexibility while maintaining adherence to regulatory objectives.

Furthermore, the RBI has refined the categorization of small value loans with a new cap of Rs 25 lakh or 0.4% of Tier I capital, subject to a Rs 3 crore ceiling per borrower. These changes are part of a broader goal to enable UCBs to have 50% of their loans in small value categories by March 31, 2026.