RBI updates city co-operative bank mortgage exposure limits after 11 years


The Reserve Bank of India (RBI) has doubled the limit on housing loans issued by various Urban Cooperative Banks (UCBs). The last time these limits were revised was in 2011.

In its June monetary policy, the RBI said: “In view of the increase in housing prices since the last review of the limits, and also taking into account the needs of customers, it has been decided to increase the existing limits on individual housing loans by the cooperative banks .”

Here is a detail of the new limits and the measures taken by RBI to safeguard the quality of UCB’s assets.

New limits

Tier I UCBs can now issue individual home loans up to Rs 60 lakh, and Tier II UCBs can issue loans up to Rs 1.4 crore.

Tier I UCBs are UCBs that have deposits of less than Rs 100 crore in a single district, or UCBs that have deposits of less than Rs 100 crore and they were originally in a single district, but later, due to reorganization, became multi-district UCBs.

Apart from this, if these banks have deposits of less than Rs 100 crore and they operate in more than one district, they will also be classified as Tier I, provided that the branches are in contiguous districts and the Advances from branches in a district account for 95 percent of UCB’s total deposits and advances.

Tier I UCBs can now issue individual home loans up to Rs 60 lakh, and Tier II UCBs can issue loans up to Rs 1.4 crore.

Guarantees taken

The RBI has realized the need for UCBs to have a good diversified loan portfolio and has therefore revised the lending standards for them. According to the main circular issued on June 23, the RBI reduced the exposure limits of UCBs to a group of connected borrowers by 15% from the previous limit of 40% to 25%.

However, the single borrower loan exposure limit for UCBs remains unchanged at 15%. The exposure limits of UCBs to the housing, real estate and commercial real estate sector have been limited to 10% of the total assets of the relevant UCB. However, the above 10% ceiling may be extended by 5% if UCB lends to individuals in accordance with the RBI priority sector classification guidelines.

In addition to these loan exposure limits, the RBI has also prohibited UCBs from applying any foreclosure or prepayment penalties on variable interest rate home loans from June 26, 2022. In addition, UCBs n will only issue home loans with a maximum repayable term of 20 years. , including a moratorium or repayment holiday (if applicable).

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