In today’s (June 8, 2022) statement of development and regulatory policies, the Reserve Bank of India (RBI) announced measures to support cooperative banks by doubling the credit limits for the individual borrowers of Primary (Urban) Co-operative Banks (UCBs) and Rural Cooperative Banks (RCBs) – State Cooperative Banks and District Central Cooperative Banks.
According to the announcement made by RBI today, the revised limit for UCBs in Tier I cities has now been revised to Rs 60 lakh. The previous limit was Rs 30 lakh. Similarly, for Tier-II cities the limit has been increased from Rs 70 lakh to Rs 1.4 crore. For rural co-operative banks, the limit has been increased from Rs 20 lakh to Rs 50 lakh for RCBs with an assessed net worth less than Rs 100 crore; and from Rs 30 lakh to Rs 75 lakh for other RCBs. RBI will issue a detailed circular separately, the statement said. The limits were last revised in 2009 for RCBs and in 2011 for UCBs. Taking into account the increase in housing prices since the limits were last revised and considering the customer needs, it has been decided to increase the existing limits on individual housing loans by cooperative banks,” said the statement from RBI.
Rural Co-operative Banks (RCBs) permitted to Lend to the Commercial Real Estate – Residential Housing (CRE-RH) Sector
To support the residential housing growth in rural areas the RBI has opened a window for commercial real estate developers to access finance from State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs). As per the extant guidelines, State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs) are prohibited from extending loans to the commercial real estate sector. “Considering the growing need for affordable housing and to realise their potential in providing credit facilities to the housing sector, it has been decided to allow StCBs and DCCBs to extend finance to Commercial Real Estate – Residential Housing (CRE-RH) within the existing aggregate housing finance limit of 5 per cent of their total assets. A detailed circular will be issued separately” the statement said.
Urban Cooperative Banks (UCBs) are permitted to Offer Door-step banking
“In order to attain harmonization of the regulatory framework across REs and to provide the convenience of banking services to the customers at their doorstep, it has been decided to permit UCBs to extend doorstep banking services to their customers on par with scheduled commercial banks. A detailed circular will be issued separately” the statement said.
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Can this impact the housing loan portfolio of nationalised banks?
I don’t think so. As the transmission of the repo rate is immediate, the borrower sees the impact on the home loan interest rate within three months. When the repo rate rises, the repo rate-linked lending rate (RLLR) also goes up, leading to an increase in the home loan interest rate and EMI for the borrower.