Reetu | Jun 24, 2022 |
RBI doubles limit on home loans issued by Urban Cooperative Banks
The Reserve Bank of India (RBI) Vide RBI/2022-23/76(DOR.CRE.REC.No.49/ 09.22.010/2022-23) dated 23rd June 2022 doubles limit on home loans issued by Urban Cooperative Banks.
RBI raised the cap on home loans offered by urban cooperative banks on Thursday (UCB). As a result, the central bank stated in a master circular that tier-I UCBs are permitted to make loans of up to Rs.1.4 crore while tier-II UCBs are permitted to offer loans of up to Rs.60 lakh for individual homes. The statement was made by the RBI in its June monetary policy. The last time the UCB lending cap was changed was in 2011.
The RBI had stated on June 8 that the current limits on individual housing loans by cooperative banks have been increased “taking into consideration the increase in housing costs since the restrictions were last amended and considering the needs of customers.”
On home loans extended with a floating interest rate basis, UCBs cannot impose foreclosure fees or pre-payment penalties. The circular stipulated that housing loans provided by UCBs should be repaid in no more than 20 years.
The prudential lending standards for these institutions have also been updated by the central bank. The RBI has decreased the exposure restrictions of UCBs to a set of related borrowers from 40 percent to 25 percent of its total tier-I capital, according to the circular. The UCB exposure cap for a single borrower is still set at 15% of tier-I capital. Housing, real estate, and commercial real estate loan exposure for UCBs is capped at 10% of their total assets.
On June 8, the central bank approved loans for residential housing projects from rural cooperative banks. The goal of the action is to increase the amount of credit that cooperative banks extend to the housing sector.
Please refer to our Master Circular DCBR.BPD.(PCB) MC No.9/09.22.010/2015-16 dated July 1, 2015 on the captioned subject (available at RBI website https://rbi.org.in/). The enclosed Master Circular consolidates and updates all the instructions / guidelines on the subject issued till date.
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