The Reserve Bank of India (RBI) has announced a rise in the small value loan ceiling for Urban Co-operative Banks (UCBs) to Rs 3 crore per borrower. According to an RBI circular issued on February 24, the revised definition encompasses loans valued not more than Rs 25 lakh or 0.4 percent of the bank's Tier I capital, whichever is higher. However, the maximum limit stands at Rs 3 crore per borrower, the central bank noted. The RBI has stated that all existing conditions, timelines, and intermediate targets will remain unaffected by this change.
The RBI noted that the aggregate exposure of UCBs to the housing, real estate, and commercial real estate sectors is capped at 10 percent of total assets, with an additional allowance of 5 percent for priority sector housing loans. For individual housing loans, the ceilings are set at Rs 60 lakh for Tier-1 UCBs and Rs 1.4 crore for other UCBs. The circular specifies that these prudential limits have been revised to accommodate changing market dynamics.
The circular noted that further stipulations include a cap on UCBs' aggregate exposure to residential mortgages not classified as a priority sector, which should not exceed 25 percent of total loans and advances. Additionally, exposure to the real estate sector, excluding individual housing loans, is limited to 5 percent of total loans and advances.