RBI Revises Lending Norms for Urban Cooperative Banks (UCBs).

Banking & Finance

On February 24, 2025, the Reserve Bank of India (RBI) revised the lending norms for Urban Co-operative Banks (UCBs), permitting them to classify loans up to ₹25 lakh or 0.4% of Tier I capital, whichever is higher, as small-value loans, with a maximum ceiling of ₹3 crore per borrower.


      - Previously, UCBs were allowed to classify loans up to ₹25 lakh or 0.2% of Tier I capital as small-value loans, with a ceiling of ₹1 crore per borrower.

     

     

Main Point :-   (i) Under the revised norms, housing loans under Priority Sector Lending (PSL) will no longer be included in the exposure to commercial real estate (CRE).

      (ii) This exclusion aims to differentiate between priority sector housing and other real estate loans to streamline the exposure guidelines.

(iii) In terms of caps, the new norms allow residential mortgages (non-PSL) to be up to 25% of total loans, compared to the previous limit of 10%. For other real estate loans, excluding housing loans, the cap is now set at 5% of total loans. Additionally, loans to builders and developers are restricted to 5% of total loans.

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