The Reserve Bank of India has increased the cap for unsecured loans provided by urban co-operative banks to 20% of total advances, up from the previous 10%. Within this limit, individual unsecured advances are capped at Rs 5 lakh for Tier 1, Rs 7.5 lakh for Tier 2, and Rs 10 lakh for Tier 3 and Tier 4 UCBs. Moreover, the proposed draft suggests raising the lending limit to nominal members for buying consumer durables to Rs 2.5 lakh per borrower.
The revised norms also outline that housing loans for Tier 1 and Tier 2 UCBs should not exceed 20 years, including the moratorium period, while Tier 3 and Tier 4 banks can set the tenor based on their board-approved policies. It is mandated that UCBs detail risk management and pricing strategies for housing loans in their credit policy, considering borrower longevity and the extended nature of these exposures.
Feedback on the draft regulations can be submitted by March 4, 2026. The amendments are slated to be effective from October 1, 2026, or an earlier date upon complete adoption by UCBs, as per the RBI statement. The moratorium on housing loans is specifically for house construction purposes and not for buying completed houses. For Tier 1 and Tier 2 UCBs, the maximum moratorium period for housing loans is 18 months from the first disbursement or completion date.
Additionally, the proposed changes suggest deregulating tenor and moratorium requirements for housing loans for Tier 3 and Tier 4 UCBs. The RBI emphasizes that UCBs can offer loans to nominal members only if their by-laws permit it in line with state co-operative Acts. Loans to nominal members can include those for consumer durables up to Rs 2.5 lakh per borrower, and loans against fixed deposits, gold, silver, life insurance policies, and government securities within the approved monetary limits.
