RBI Revises Norms For Urban Co-operative Banks For Larger Operational Freedom

RBI Revises Norms For Urban Co-operative Banks For Larger Operational Freedom

It will enhance flexibility without compromising regulatory objectives

The Reserve Bank of India (RBI) has said that the aggregate limit of Urban Co-operative Banks to residential mortgages (housing loans to individuals) should not exceed 25 percent of their total loans and advances.

This means, the exposure to housing, real estate and commercial real estate loans is capped at 10 percent. The ceiling can be increased by an additional 5 percent to grant housing loans to individuals.

The central bank stated, “We have revised the definition of small-value loans as loans of value not more than Rs.25 lakh or 0.4 percent of their Tier I capital, whichever is higher. This is subject to a ceiling of Rs.3 crore per borrower.”

It has classified UCBs into four tiers.

Currently, it is mandatory for the UCBs to have at least 50 percent of their aggregate loans and advances, comprising small value loans of not more than Rs.25 lakh or 0.2 percent of their Tier I capital, whichever is higher. This is subject to a maximum of Rs.1 crore per borrower by 31 March 2026.

It added that UCB’s total exposure to residential mortgages, other than those classified as a priority sector, shall not exceed 25 percent of its total loans and advances. For the real estate sector, housing loans to individuals shall not exceed five percent of its total loans and advances.