Mumbai, Feb 10 (NationPress) The Reserve Bank of India has made the decision to increase the overall limit for unsecured loans issued by urban co-operative banks to 20 percent of total advances, up from the previous 10 percent of total assets, as outlined in the revised draft regulations released on Tuesday.

The maximum amount of individual unsecured loans within this aggregate limit has been set at Rs 5 lakh for Tier 1 banks, Rs 7.5 lakh for Tier 2, and Rs 10 lakh for Tier 3 and Tier 4 UCBs.

Additionally, the limit for loans to nominal members for acquiring consumer goods is proposed to rise to Rs 2.5 lakh per borrower.

The draft guidelines specify that the duration of housing loans for Tier 1 and Tier 2 should not exceed 20 years, including the moratorium period, while Tier 3 and Tier 4 banks can set the duration of housing loans according to their board-approved policies.

The credit policy of any UCB must include risk management and pricing strategies for housing loans, taking into account the life expectancy of the borrower and the longer-term nature of these loans.

Comments on the draft can be submitted until March 4, 2026. The new amendments are set to take effect on October 1, 2026, or sooner if adopted fully by a UCB, according to the RBI.

The moratorium on housing loans will be extended solely for the construction of homes and will not be applicable for loans aimed at purchasing completed properties.

For Tier 1 and Tier 2 UCBs, the maximum moratorium period for housing loans will be 18 months from the loan's first disbursement date or the completion date.

Tier 3 and Tier 4 UCBs may set their moratorium periods for housing loans within the overall loan duration, based on board-approved guidelines.

Furthermore, the regulations concerning the duration and moratorium for housing loans are suggested to be deregulated for Tier 3 and Tier 4 UCBs.

The RBI indicated that a UCB may extend loans to nominal members only if its by-laws contain a provision, in accordance with the relevant state co-operative Acts, permitting the issuance of credit facilities to nominal members.

“In accordance with the above, a UCB may provide the following loans to nominal members: loans for the purchase of consumer goods capped at Rs 2.5 lakh per borrower, and loans against fixed deposits, gold and silver jewelry, life insurance policies, and government securities, adhering to the monetary cap established by its board-approved policy,” the RBI announcement stated.

These proposals were part of the Statement on Developmental and Regulatory Policies dated February 6, 2026. The draft directives have been released by the RBI’s Department of Regulation for public review.

The draft amendments encompass concentration risk management, credit facilities, and the financial statements, presentations, and disclosures of Urban Co-operative Banks.