RBI raises co-op bank housing loan limits by 100%

The Reserve Bank of India (RBI) has raised the limit on individual housing loans from co-operative banks by more than 100 percent, Governor Shaktikanta Das has announced.

Considering the importance of cooperative banks in promoting inclusive growth, Das announced three measures for the cooperative banking sector.

To facilitate a better flow of credit to the housing sector, the limits of individual housing loans granted by the cooperative banks have been revised upwards by more than 100% in view of the increase in property prices, a said Mr. Das.

In line with the exemption enjoyed by Regular Commercial Banks (SCBs) and UCBs, the RBI has also proposed to allow Rural Co-operative Banks to extend financing to “Commercial Property – Residential Housing” (i.e. say loans for residential housing projects), under the overall housing finance limit of 5% of their total assets.

The move will further increase credit flows from co-operative banks to the housing sector, the RBI Governor said.

It was also decided to allow UCBs to extend home banking services to their customers. “This will enable UCB to meet the needs of its customers, especially the elderly and people with disabilities.”

The Central Bank’s rate-setting committee voted to raise the key interest rate for a second consecutive month to rein in prices that have been above its target range since the start of this year.

“Inflation has risen sharply well beyond the upper tolerance level,” Shaktikanta Das said in an online briefing. “Much of the rise in inflation is mainly attributed to a series of supply shocks that may be war-related,” he said. .

The central bank also raised its inflation forecast for the year ending March to 6.7% from 5.7% previously. The RBI is targeting inflation between 2% and 6%. With inflation expected to hover above the tolerance level for three quarters, the central bank withdrew its intention to “stay accommodative”.

Under Indian law, if inflation stays above 6% for three consecutive quarters, the central bank must write a letter to the government explaining the reasons for non-compliance with its mandate and suggesting corrective measures to control prices.

Indian bonds advanced, with the yield on the benchmark 10-year bond falling two basis points to 7.49%, while the rupee was little changed. The shares fell slightly.

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