What changed
Previously, UCBs could exceed the 10% total asset cap on housing/real estate exposure by an extra 5% only for housing loans up to ₹15 lakh per individual. The new circular raises that individual loan limit to ₹25 lakh for the additional 5% allocation, provided the loan qualifies as priority sector lending.
What it means for you
UCBs can now offer larger individual housing loans under the priority sector without breaching aggregate exposure norms. This supports affordable housing goals and gives urban co-operative banks more flexibility to serve lower- and middle-income borrowers. The 10% base cap and other real estate exposure rules remain unchanged.
What you must do
- Update internal lending policies to reflect the new ₹25 lakh individual housing loan limit for the additional 5% of total assets.
- Ensure all loans availing the higher limit are classified as priority sector advances as per RBI guidelines.
- Monitor aggregate exposure to housing, real estate, and commercial real estate to stay within the 10% base cap plus the 5% additional limit.
- Train credit officers on the revised eligibility criteria and documentation requirements for priority sector housing loans.
Who it affects
Primary (Urban) Co-operative Banks, Housing loan borrowers seeking priority sector loans up to ₹25 lakh, RBI supervisory teams monitoring UCB compliance
Can UCBs now exceed the 10% total asset cap for housing loans?
Yes, but only by an additional 5% of total assets, and only for housing loans to individuals up to ₹25 lakh that qualify as priority sector lending. The 10% base cap for all housing, real estate, and commercial real estate exposure remains.
Does this change affect commercial real estate or other real estate exposure limits?
No. All other instructions regarding exposure to housing, real estate, and commercial real estate remain unchanged. Only the individual loan limit for the additional 5% priority sector housing allocation has been raised.