The Reserve Bank of India (RBI) has updated the small-value loan limit for Urban Co-operative Banks (UCBs), raising it to ₹3 crore for each borrower. This adjustment is part of a larger effort to redefine small-value loans and enhance the financial stability of UCBs. Although the new limit provides more lending flexibility, the RBI has maintained the current conditions, timelines, and prudential norms to promote responsible credit distribution.
Key Points:
Revised Small-Value Loan Definition
- Loans classified as small value should not exceed ₹25 lakh or 0.4% of Tier I capital, whichever is higher.
- The maximum ceiling is capped at ₹3 crore per borrower.
- All existing conditions, timelines, and intermediate targets remain unchanged.
Mandated Loan Composition for UCBs
- UCBs must ensure that at least 50% of their total loans and advances consist of small-value loans by March 31, 2026.
- Bank boards are required to periodically review loan portfolios and may set lower lending ceilings to manage risk.
Housing and Real Estate Exposure Limits
- Aggregate exposure to housing, real estate, and commercial real estate sectors is capped at 10% of total assets.
- An additional 5% exposure is permitted for priority sector housing loans.
Individual housing loan limits
- ₹60 lakh for Tier-1 UCBs.
- ₹1.4 crore for other UCBs.
Caps on Real Estate Exposure
- UCBs’ exposure to residential mortgages (non-priority sector loans) must not exceed 25% of total loans and advances.
- Exposure to real estate (excluding individual housing loans) is limited to 5% of total loans and advances.
