The Reserve Bank of India on Wednesday issued a set of amendment directions for Urban Co-operative Banks (UCBs), revising norms on unsecured lending, housing finance and disclosures, while retaining key prudential safeguards.
Under the revised framework, UCBs are permitted to maintain aggregate unsecured loans up to 20% of their total advances. Unsecured loans up to Rs 50,000 per borrower, classified under the priority sector, will be excluded from this ceiling for UCBs compliant with eligibility criteria for business authorisation (ECBA).
The central bank has also specified borrower-level caps on unsecured lending within this overall limit, fixing ceilings at Rs 5 lakh for Tier 1 banks, Rs 7.5 lakh for Tier 2 banks, and Rs 10 lakh for Tier 3 and Tier 4 UCBs.
Further, loans to nominal members for purchase of consumer durables have been capped at Rs 2.5 lakh per borrower, subject to enabling provisions in the by-laws.
In the housing segment, Tier 3 and Tier 4 UCBs are allowed to determine loan tenor and moratorium periods based on Board-approved policies.
However, Tier 1 and Tier 2 banks will continue to be subject to a maximum housing loan tenure of 20 years, including a moratorium period of up to 24 months, which is permitted only for under-construction properties.
As part of prudential measures, UCBs have been prohibited from extending loans against fixed deposits of other banks, while being allowed to lend against their own deposits under Board-approved policies.
The definition of unsecured advances has also been rationalised, with certain exposure, such as loans backed by enforceable salary deductions and short-term receivables, eligible to be treated as secured.
To strengthen transparency, the RBI has mandated enhanced disclosures on unsecured advances and lending to nominal members, including their share in total advances, asset quality indicators such as SMA and NPAs, provisioning levels, and the number and proportion of nominal members.
The amendments will come into effect from October 1, 2026, or earlier if adopted in full by individual UCBs.
