RBI Eases Norms for Urban Co-op Banks

Mumbai, Feb 24 (PTI) The Reserve Bank on Monday said aggregate exposure of Urban Co-operative Banks to residential mortgages (housing loans to individuals) should not exceed 25 per cent of their total loans and advances, a move aimed at providing greater operational freedom to the lenders.

In terms of extant instructions, aggregate exposure of a UCB to housing, real estate and commercial real estate loans is capped at 10 per cent of its total assets. The ceiling of 10 per cent can be exceeded by an additional 5 per cent of total assets for the purpose of granting housing loans to individuals.

The RBI has issued revised prudential norms with a view to giver greater operational flexibility to UCBs without diluting the regulatory objectives.

"On a review, it has been decided to revise the definition of small value loans as loans of value not more than Rs 25 lakh or 0.4 per cent of their Tier I capital, whichever is higher, subject to a ceiling of Rs 3 crore per borrower," it said.

Currently, UCBs are required to follow the prescribed glide path to have at least 50 per cent of their aggregate loans and advances comprising of small value loans – loans of value not more than Rs 25 lakh or 0.2 per cent of their Tier I capital, whichever is higher, subject to a maximum of Rs 1 crore per borrower – by March 31, 2026.

It further said aggregate exposure of a UCB to residential mortgages (housing loans to individuals), other than those eligible to be classified as a priority sector, shall not exceed 25 per cent of its total loans and advances.

Also, aggregate exposure of a UCB to the real estate sector, excluding housing loans to individuals, shall not exceed five per cent of its total loans and advances, the RBI said.

The Reserve Bank has classified UCBs into four tiers.