RBI increases Urban co-operative banks' small value loans per borrower ceiling to Rs 3 crore

The Reserve Bank of India

The Reserve Bank of India (RBI) on February 24 has increased the small value loans ceiling per borrower of Urban Co-operative Banks (UCB) to Rs 3 crore per borrower and aggregate exposure of a UCB to housing, real estate and commercial real estate loans to 25 percent, according to the central bank notification.

The central bank said it has been decided to revise the definition of small value loans as loans of value not more than Rs 25 lakh or 0.4 per cent of their Tier I capital, whichever is higher, subject to a ceiling of Rs 3 crore per borrower.

Earlier, UCBs were required to follow the prescribed glide-path to have at least 50 per cent of their aggregate loans and advances comprising of small value loans – that is, loans of value not more than Rs 25 lakh or 0.2 per cent of their Tier I capital, whichever is higher, subject to a maximum of Rs 1 crore per borrower – by March 31, 2026.

While making revision, the central bank has kept timelines and the intermediate targets 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, release added.

The RBI has said that the guidelines will be applicable from immediate effect.

Further, aggregate exposure of a UCB to residential mortgages (housing loans to individuals), other than those eligible to be classified as priority sector, shall not exceed
25 per cent of its total loans and advances.

Aggregate exposure of a UCB to real estate sector, excluding housing loans to individuals, shall not exceed five per cent of its total loans and advances, release added.

The central bank has set individual housing loan set at Rs 60 lakh for tier-I UCBs, Rs 1.40 crore for tier-II, Rs 2 crore for tier-III, and Rs 3 crore for tier-IV, RBI said in a release.

Provisioning requirement for investment in security receipts (SRs) has extended the 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.