UCB Lending Norms: RBI’s Revised Unsecured and Housing Loan Rules
Why in the news
After a draft consultation, the RBI has settled revised lending rules for Urban Co-operative Banks. Larger, healthy banks get room to operate, while smaller ones face tighter risk control.
Key facts
- Unsecured loan ceiling now measured against total advances: 20%, versus earlier 10% of total assets.
- UCBs meeting ECBA can leave out unsecured advances up to ₹50,000 per borrower (priority sector loans) from this limit.
Individual unsecured loan caps
| Tier | Per-borrower limit |
|---|---|
| Tier-I | ₹5 lakh maximum |
| Tier-II | ₹7.5 lakh maximum |
| Tier-III and IV | ₹10 lakh maximum |
Housing loans
- Rules separate ready-to-move-in homes from under-construction ones.
- Tier-I and II: tenure capped at 20 years, moratorium included.
- Moratorium is allowed only for under-construction property and is not allowed for completed houses.
- Tier-III and IV may set tenure and moratorium via Board-approved policy, considering borrower life expectancy.
About ECBA and tiers
- ECBA (Eligibility Criteria for Business Authorisation) replaced the FSWM norms. Qualifying needs Net NPA of 3% or less, steady profits and no CRR/SLR default.
- Tiers follow deposit size: Tier 1 below ₹100 crore; Tier 2 up to ₹1,000 crore; Tier 3 up to ₹10,000 crore; Tier 4 above ₹10,000 crore.
- Nominal members lack full voting rights but may get small loans, such as consumer durable loans up to ₹2.5 lakh, if by-laws permit.
Exam angle
- Regulator: RBI; entity: Urban Co-operative Banks.
- Key numbers: 20% of advances, ₹50,000 exemption, 20-year tenure cap.