Following the classification of urban cooperative banks (UCBs) into four tiers under the revised regulatory framework, the RBI has decided to set the limits on housing loans sanctioned by UCBs to an individual borrower at Rs 60 lakh for Tier-1 UCBs and Rs 140 lakh for Tier-2 to 4 UCBs.
The RBI stated on Friday that the other terms and conditions of the circular concerned remain unchanged. Existing housing loans sanctioned prior to the date of this circular that may have exceeded the ceiling will be allowed to run till maturity.
The RBI had constituted the Expert Committee on Urban Co-operative Banks to examine the issues in urban cooperative banking sector and to review regulatory/supervisory approach for strengthening the sector. Based on the recommendations of the committee, the apex bank had released the Revised Regulatory Framework for UCBs on July 19, 2022.
Given the heterogeneity in the cooperative sector, a tiered regulatory framework is required to balance the spirit of mutuality and cooperation more prevalent in banks of smaller sizes and those with a limited area of operation vis-à-vis the growth ambitions of the large-sized UCBs to spread their area of operation and undertake more complex business activities. Accordingly, it has been decided to adopt a four-tiered regulatory framework, as against the existing two-tiered framework, for the categorization of UCBs. Going forward, this categorization may be used for differentiated regulatory prescriptions aimed at strengthening the financial soundness of the UCBs.
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