In his Monetary Policy Statement, Reserve Bank of India Governor Shri Sanjay Malhotra announced a series of measures aimed at strengthening Urban Co-operative Banks (UCBs) and supporting their next phase of growth.
In recent years, several regulatory initiatives have been undertaken to provide greater flexibility to UCBs in their lending operations. Building on these efforts, the Reserve Bank now proposes to rationalise the existing regulatory norms applicable to unsecured loans by UCBs, limits on lending to nominal members, and the tenor and moratorium requirements for housing loans. The RBI also announced the launch of Mission-SAKSHAM (Sahakari Bank Kshamta Nirman), a large-scale capacity-building initiative for the sector.
The RBI stated that the proposed review will adopt a tiered and simplified approach, while maintaining prudential discipline, taking into account the growth in total loans and advances of UCBs over the past few years. Draft directions in this regard will be issued shortly for public consultation.
Addressing the post-policy briefing, Governor Malhotra said, “To strengthen the managerial and technical capacity of the UCBs, we shall launch Mission-SAKSHAM (Sahakari Bank Kshamta Nirman). The mission intends to train over 1.4 lakh participants from UCBs.”
Primary (Urban) Co-operative Banks play a vital role in promoting financial inclusion and serving the unbanked and under-banked population. Securing their next phase of growth would depend on developing stronger skills and competencies, along with enhanced technical capabilities and operational resilience. To serve this objective, the Reserve Bank will soon roll out Mission-SAKSHAM as a sector-wide capacity-building and certification framework.
The initiative will be implemented through a combination of physical training programmes and a scalable digital learning platform, covering around 1.40 lakh participants across all functional areas. The Reserve Bank will endeavour to conduct these programmes at locations close to participating UCBs and deliver training content in regional languages to the extent feasible. The mission will be pursued in partnership with the Umbrella Organisation of UCBs, as well as national and state federations.
Referring to further measures for the sector, the Governor stated that four key initiatives have been proposed for UCBs. “The first two pertain to raising the financial limits on unsecured loans and loans to nominal members by UCBs,” he said. He further announced that the Reserve Bank proposes to remove the tenor- and moratorium-related requirements on housing loans extended by Tier III and Tier IV UCBs.
Announcing additional policy steps, the Governor said that the measures are aimed at enhancing customer protection, advancing financial inclusion, improving credit flow, strengthening UCBs, promoting ease of doing business for NBFCs, and deepening financial markets.
He added that in the financial inclusion space, the Reserve Bank has comprehensively reviewed the Lead Bank Scheme, the Kisan Credit Card Scheme, and the Business Correspondent Model, and draft revised guidelines will be issued shortly. A unified reporting portal will also be launched to enable better management of Lead Bank Scheme data.
The Governor also announced that the limit for collateral-free loans to MSMEs is proposed to be increased from Rs 10 lakh to Rs 20 lakh. To further promote financing to the real estate sector, banks will be permitted to lend to REITs, subject to certain prudential safeguards.
It bears recalling that during the last meeting of UCB sector representatives with the RBI Governor in Mumbai, the sector had sought relief in respect of tenor-related norms for housing loans. At present, UCBs can extend housing loans with a maximum tenor of 20 years, whereas commercial banks are permitted to offer housing loans with tenors of up to 30 years.