The Reserve Bank has periodically set prudential norms for Urban Co-operative Banks (UCBs) to strengthen their financial stability. To streamline these norms while maintaining regulatory objectives and providing greater operational flexibility, a review has been conducted. The revised guidelines are as follows:
Small Value Loans
It has been decided to revise the definition of small value loans as loans of value not more than ₹25 lakh or 0.4 per cent of their Tier I capital, whichever is higher, subject to a ceiling of ₹3 crore per borrower. All other conditions, as well as the timelines and the intermediate targets remain unchanged. Boards of UCBs, however, shall periodically review the portfolio behaviour and quality under different loan-size categories and where necessary, may consider fixing lower ceilings.
Real Estate Exposure Norms
Under the updated guidelines, the total exposure of UCBs to housing, real estate, and commercial real estate loans is capped at 10% of their total assets, with an additional 5% allowed for housing loans to individuals that qualify under the priority sector.
Further updates specify that housing loans for individuals will be subject to a tiered cap based on the UCB’s classification, with Tier 1 UCBs restricted to ₹60 lakh per borrower, Tier 2 to ₹1.4 crore, and so on, up to ₹3 crore for Tier 4 UCBs. Importantly, housing loans to individuals not eligible for priority sector classification will be limited to 25% of total loans, while exposure to the broader real estate sector (excluding housing loans to individuals) will not exceed 5% of total loans.
Link – https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12785&Mode=0
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