The Reserve Bank of India (RBI) on Monday revised the norms for urban co-operative banks (UCBs), allowing them to classify loans of up to Rs 25 lakh, or 0.4% of Tier I capital, whichever is higher, as small-value loans, subject to a ceiling of Rs 3 crore per borrower.
Earlier, UCBs could classify loans of up to Rs 25 lakh, or 0.2 percent of Tier I capital, as small-value loans, subject to a ceiling of Rs 1 crore per borrower.
The revised norms will allow UCBs to classify larger loans under the category of small-value advances, giving them more flexibility.
The move came after the RBI on February 14 had imposed business restrictions on New India Co-operative Bank and superseded the bank’s board due to concerns over poor governance.
The RBI has also increased the aggregate exposure limit for residential mortgages to 25% of its total loans and advances. Exposure of UCBs to the real estate sector, excluding housing loans, is capped at 5%, the RBI said.
“Aggregate exposure of a UCB to residential mortgages (housing loans to individuals), other than those eligible to be classified as the priority sector, shall not exceed 25% of its total loans and advances,” said the RBI in a circular.
Additionally, the RBI has revised the individual housing loan limits for different tiers of UCBs. The new limits range from Rs 60 lakh to Rs 3 crore.
The RBI has also extended the glide path for provisioning requirements for investment in security receipts (SRs) by two years until 2027-28.
“On a review, it has been decided to extend the above glide path for UCBs for additional two years till FY2027-28. However, any provisions already made for the specified SRs shall continue to be maintained,” said the RBI.
Last year, the RBI had extended the glide path to achieve the target of minimum percentage of small value loans in aggregate loans and advances by two years to March 2026.