RBI MPC: Central Bank doubles individual housing loan cap for cooperative lenders; allows rural cooperative to lend for residential housing projects

The Reserve Bank on Wednesday doubled the maximum loan amount that a cooperative bank can lend to an individual to up to Rs 1.40 crore in view of the surge in housing prices. THe RBI Governor Shaktikanta Das announced this today after the consclusion of the three-day Monetary Policy Committee (MPC) meeting.  

"The limits for individual housing loans being extended by Urban Cooperative Banks (UCBs) and Rural Cooperative Banks (RCBs- State Cooperative Banks and District Central Cooperative Banks) which were last fixed in 2011 and 2009 respectively are being revised upwards by over 100 per cent taking into account increase in house prices. This will facilitate better flow of credit to the housing sector," Das said in third scheduled monetary policy announcements.

Das announced that urban cooperative banks will now be allowed to lend up to Rs 1.40 crore as against the previous cap of Rs 70 lakh, while rural cooperative banks can now lend up to Rs 75 lakh as against earlier cap of Rs 30 lakh, a PTI report said.

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, Das said.

The guidelines governing the maximum permissible loan limits for cooperative lenders were last reviewed over a decade ago.

This is among the three measures taken by the Central Bank for the cooperative banks. The steps are being taken in view of the importance of cooperative banks in promoting inclusive growth, the statement said. 

Governor Das, who made the announcement along with the other measures in the bi-monthly policy review, added that a detailed circular on the same will be issued separately.

The Governor said urban cooperative lenders are classified into tier-I and tier-II, and the maximum loan amount cap will be governed by how a bank is recognised.

Rural cooperative banks include State Cooperative Banks and District Central Cooperative Banks, and their net worth will determine the maximum permissible loan limits, he said.

Those with a net worth of up to Rs 100 crore will now be able to lend up to Rs 50 lakh per individual housing loan as against the previous cap of Rs 20 lakh, while the others can give loans of up to Rs 75 lakh, Das said.

In what can get a cheer to the developers, Das also announced that rural cooperative banks will now be permitted to lend to builders who have launched residential projects, which they are currently prohibited from.

"In line with the dispensation available to Scheduled Commercial Banks (SCBs) and UCBs, it is now proposed to permit Rural Cooperative Banks (RCBs- State Cooperative Banks and District Central Cooperative Banks) to extend finance to ‘commercial real estate – residential housing’ (i.e. loans for residential housing projects), within the existing aggregate housing finance limit of 5% of their total assets. This measure will further augment credit flows from the cooperative banks to the housing sector," Das said.

Das said the decision has been taken considering the growing need for affordable housing and to realise their potential in providing credit facilities to the housing sector.

He said the overall housing finance limit for rural cooperative banks is unchanged at 5 per cent, and the lenders will have to extend the Commercial Real Estate, Residential Housing loans within the aggregate limit.

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Meanwhile, the RBI has also decided to permit urban cooperative banks to allow doorstep banking services to help the elderly and differently-abled segments, Das said. 

"It has also been decided to permit UCBs to extend doorstep banking services to their customers. This will enable UCBs to meet the needs of their customers, especially senior citizens and differently abled," Das said.

Inputs from PTI