RBI unveiles draft amendments to lending norms for Urban Cooperative Banks

The Reserve Bank of India (RBI) has unveiled draft amendments to lending norms for Urban Cooperative Banks (UCBs). It is proposing to double the aggregate ceiling for unsecured advances to 20% of total assets. The proposals also include enhanced individual loan limits and deregulation for housing loans for certain UCB tiers. The RBI is launching Mission-SAKSHAM, a significant capacity-building program aimed at training over 1.4 lakh UCB personnel.

As per the draft directions, Tier 3 and Tier 4 UCBs will be permitted to determine the tenure and moratorium period of housing loans in accordance with their Board-approved policies. In contrast, Tier 1 and Tier 2 UCBs will continue to be governed by a maximum housing loan tenor of 20 years, including the moratorium period, with the moratorium capped at 18 months.

The RBI has also proposed revised limits for individual unsecured advances, linked to the tier of the UCB. Under the draft norms, the maximum unsecured loan per borrower has been fixed at Rs 5 lakh for Tier 1 UCBs, Rs 7.5 lakh for Tier 2 UCBs, and Rs 10 lakh for Tier 3 and Tier 4 UCBs, within the overall unsecured lending ceiling prescribed under the concentration risk framework.

RBI has noted that moratorium in housing loans shall be permitted only for loans granted for construction of houses. Consequently, moratorium shall not be allowed in housing loans extended for the purchase of completed houses. The proposed amendments are scheduled to come into force from October 1, 2026, or earlier if adopted in entirety by a UCB, following finalisation after public consultation.

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