RBI Implements New Lending Guidelines for Urban Cooperative Banks
RBI caps unsecured lending, tightens housing loan norms for UCBs
Business Standard
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The Reserve Bank of India (RBI) has introduced new lending norms for Urban Cooperative Banks (UCBs), capping unsecured loans at 20% of total loans and setting individual unsecured loan limits between ₹5 lakh and ₹10 lakh. The guidelines, effective from October 1, 2026, also tighten housing loan terms and restrict loans against fixed deposits from other banks.
- 01RBI caps unsecured loans for UCBs at 20% of total loans.
- 02Individual unsecured loan limits set at ₹5 lakh for Tier-I, ₹7.5 lakh for Tier-II, and ₹10 lakh for Tier-III and Tier-IV UCBs.
- 03Housing loan tenures capped at 20 years for Tier-I and Tier-II UCBs.
- 04Moratoriums allowed only for under-construction properties, limited to 24 months.
- 05UCBs barred from extending loans against fixed deposits from other banks.
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On Wednesday, the Reserve Bank of India (RBI) announced revised lending norms for Urban Cooperative Banks (UCBs) aimed at enhancing risk management and streamlining credit rules. The RBI has capped unsecured loans at 20% of total loans, with individual limits set at ₹5 lakh for Tier-I, ₹7.5 lakh for Tier-II, and ₹10 lakh for Tier-III and Tier-IV UCBs. Additionally, unsecured advances up to ₹50,000 crore per borrower will not count towards this limit if they meet the eligibility criteria for priority-sector loans. The guidelines also impose stricter conditions on housing loans, limiting the tenure to 20 years for Tier-I and Tier-II UCBs, with moratoriums allowed only for under-construction properties and capped at 24 months. Larger UCBs will have the flexibility to set their own loan tenures. Furthermore, UCBs are prohibited from offering loans against fixed deposits from other banks to mitigate interconnected risks within the banking system. These guidelines will take effect on October 1, 2026, although UCBs may choose to implement them sooner.
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These new guidelines will affect borrowers seeking unsecured loans and housing finance from UCBs, potentially limiting their borrowing capacity and altering loan terms.
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