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

Banking & Finance | Dated: 26 Feb 2025

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.

🎯 Key Highlights:

  • - 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.

💡 Other Important Facts:

  • (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.

📚 Test Your Knowledge:

What is the new maximum ceiling per borrower for small-value loans under the revised RBI norms for Urban Co-operative Banks (UCBs)?

Correct Answer: ₹3 crore

🚀 Quick Recap: