RBI proposes to raise unsecured loans to 20% of total for urban co-op banks
RBI has proposed raising the unsecured loan cap for urban co-operative banks to 20 per cent of advances, revising norms on unsecured lending and housing loan tenors
 "RBI proposes to raise unsecured loans to 20% of total for urban co-op banks")
The Reserve Bank of India has increased the unsecured loans cap for urban co-operative banks to 20 per cent of the total advances of the preceding financial year, from 10 per cent of total assets, in the revised draft norms aimed at rationalising the definition of unsecured advances.
The limits for individual unsecured advances within the aggregate ceiling of unsecured advances shall be Rs 5 lakh for Tier 1, Rs 7.5 lakh for Tier 2, and Rs 10 lakh for Tier 3 and Tier 4.
Further, the lending limit to nominal members for the purchase of consumer durables is also proposed to be enhanced to Rs 2.5 lakh per borrower. Additionally, the tenor and moratorium requirements for housing loans are proposed to be deregulated for Tier 3 and Tier 4 UCBs.
The draft said the tenor of housing loans for Tier 1 and Tier 2 will not exceed 20 years, including the moratorium period, while Tier 3 and Tier 4 are permitted to determine the tenor of housing loans as per their board-approved policies. The credit policy of a UCB must specify risk management and pricing strategies for housing loans, considering the life expectancy of the borrower and the longer duration of these exposures.
Similarly, the moratorium on housing loans is extended only for the purpose of construction of houses and shall not be allowed for loans for the acquisition of completed houses. For Tier 1 and Tier 2 UCBs, moratorium periods in housing loans shall be a maximum of 18 months from the date of first disbursement of the loan or the date of obtaining completion. Tier 3 and Tier 4 UCBs may determine the moratorium periods in housing loans within the overall loan tenor as per board-approved policies.
The RBI said that a UCB may sanction loans to nominal members only if it has an enabling provision in its by-laws, in conformity with the applicable state co-operative Acts, for extending credit facilities to nominal members.
“Subject to the above, a UCB may grant the following loans to nominal members — loans for the purchase of consumer durables subject to a monetary ceiling of Rs 2.5 lakh per borrower, and loans against fixed deposit receipts, gold and silver ornaments, life insurance policies, and government securities, within the monetary ceiling as per its board-approved policy,” the RBI said.
Feedback on the draft can be submitted on or before March 4, 2026. The amendments shall come into force from October 1, 2026, or an earlier date when adopted by a UCB in entirety, the draft norms said.