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Informist, Tuesday, Feb. 10, 2026

 

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--RBI issues draft amended lending norms for urban co-operative banks 
--RBI: Moot rationalising unsecured advances definition for urban co-op bks 
--RBI: Propose higher loan limits for unsecured advances for urban co-op bks 
--RBI: Moot 20?p for unsecured advances by urban co-op bks vs 10?rlier 
--RBI seeks feedback on urban co-op bks draft lending norms by Mar 4 

 

MUMBAI – The Reserve Bank of India has proposed to revise the aggregate ceiling for unsecured advances by urban co-operative banks to 20% of total advances from the current 10% of total assets, the central bank said Tuesday. "Provided that additional unsecured advances above this prudential ceiling shall be permitted only in respect of priority sector eligible loans, subject to a monetary ceiling of INR 50,000 per borrower," it said. 

 

The RBI has also proposed to rationalise the definition of 'unsecured advances' as advances, or a portion thereof, not covered by the realisable value of a security, whether primary or collateral, to which the urban co-operative banks have a valid recourse. 

 

Further, the RBI has proposed to enhance the individual loan limits for unsecured advances by urban co-operative banks. Under this, the limit for individual unsecured advances by tier-1 urban co-operative banks will be INR 500,000, while that of tier-2 lenders will be INR 750,000. The ceiling for tier-3 and -4 urban co-operative banks is proposed to be INR 1 million, it said. 

 

The central bank has also recommended removing the clause that mandates an urban co-operative bank not to finance a borrower who is already enjoying credit facilities with another bank without obtaining a no-objection certificate from the financing bank. It has also sought to delete the clause that mandates that urban co-operative banks not finance a borrower whose aggregate credit facilities exceed the ceiling stipulated by the central bank, without the prior approval of the RBI. 

 

The central bank has also proposed that urban co-operative banks may sanction loans to nominal members if they have an enabling provision in their by-laws to extend credit facilities to such members. Under this, urban co-operative banks can grant loans for the purchase of consumer durables, subject to a monetary ceiling of INR 250,000 per borrower and loans against fixed deposit receipts, gold and silver ornaments, life insurance policies, and government securities, within the monetary ceiling. 

 

Additionally, the tenor and moratorium requirements for housing loans are proposed to be deregulated for tier-3 and tier-4 urban co-operative banks. Under this, tier-3 and tier-4 lenders will be allowed to determine the tenor of housing loans, including the moratorium period, in accordance with their board-approved policies. Further, for tier-1 and tier-2 lenders, the tenor of housing loans should not exceed 20 years, including the moratorium period, it said. 

 

"The credit policy of a UCB (urban co-operative bank) should, at a minimum, specify risk management and pricing strategies for housing loans considering inter alia the life expectancy of the borrower and the relatively longer duration of these exposures," the RBI said. 

 

The central bank has proposed that, for urban co-operative banks, a moratorium may be allowed only in cases of housing loans extended for the construction of houses. Consequently, a moratorium on loans for the acquisition of completed houses should not be allowed. 

 

For tier-1 and tier-2 lenders, the RBI has proposed that the moratorium period for housing loans be a maximum of 18 months from the date of the first disbursement of the loan or the date of obtaining the completion or occupancy certificate, whichever is later. "Tier-3 and tier-4 UCBs may determine the moratorium periods in housing loans, within the overall loan tenor, in accordance with their board-approved policies," it said. 

 

The RBI has sought comments and feedback on the draft amendment directions by Mar. 4. The amendments will come into force from Oct. 1, or on an earlier date when adopted in their entirety by an urban co-operative bank. End

 

Reported by Pratiksha

Edited by Saji George Titus

 

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