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RBI Doubles Unsecured Loan Limit for Urban Co-operative Banks to 20%

The Reserve Bank of India has proposed to double the aggregate ceiling for unsecured loans given by urban co-operative banks from 10% to 20% of total advances. It has also established tier-wise limits for individual unsecured advances, ranging from Rs 5 lakh to Rs 10 lakh. The draft norms introduce specific tenors and moratorium periods for housing loans, with varying rules for different bank tiers. Feedback on these comprehensive amendments is invited until March 4, 2026, with implementation scheduled for October 1, 2026.

Key Points: RBI Raises Unsecured Loan Ceiling for Co-operative Banks

  • Unsecured loan ceiling doubled to 20%
  • Tier-wise individual limits set up to Rs 10 lakh
  • Housing loan tenor capped at 20 years for some tiers
  • New rules effective from October 2026
3 min read

RBI raises ceiling for unsecured loans of UBCs to 20 pc of total advances

RBI increases unsecured loan limit for UCBs to 20% of advances, sets new tier-wise caps, and revises housing loan norms. Feedback open until 2026.

"The aggregate ceiling for unsecured loans... raised to 20 per cent of total advances - RBI Draft Norms"

Mumbai, Feb 10

The Reserve Bank of India has decided to raise the aggregate ceiling for unsecured loans given by urban co-operative banks to 20 per cent of total advances, from the existing limit of 10 per cent of total assets in the revised draft norms released on Tuesday.

The limits for individual unsecured advances within the aggregate ceiling of unsecured advances have been fixed at Rs 5 lakh for Tier 1, Rs 7.5 lakh for Tier 2, and Rs 10 lakh for Tier 3 and Tier 4 urban co-operative banks (UCBs).

The limit for lending to nominal members for the purchase of consumer durables is also proposed to be enhanced to Rs 2.5 lakh per borrower.

The draft norms state that the tenor of housing loans for Tier 1 and Tier 2 will not exceed 20 years, including the moratorium period, while Tier 3 and Tier 4 are permitted to determine the tenor of housing loans as per their board-approved policies.

The credit policy of a UCB must specify risk management and pricing strategies for housing loans, considering the life expectancy of the borrower and the longer duration of these exposures.

Feedback on the draft can be submitted on or before March 4, 2026. The amendments will come into force from October 1, 2026, or an earlier date when adopted by a UCB in entirety, the RBI statement said.

The moratorium on housing loans is extended only for the purpose of the construction of houses and shall not be allowed for loans for the acquisition of completed houses.

For Tier 1 and Tier 2 UCBs, moratorium periods in housing loans will be a maximum of 18 months from the date of first disbursement of the loan or the date of obtaining completion.

Tier 3 and Tier 4 UCBs may determine the moratorium periods in housing loans within the overall loan tenor as per board-approved policies.

Additionally, the tenor and moratorium requirements for housing loans are proposed to be deregulated for Tier 3 and Tier 4 UCBs.

The RBI said that a UCB may sanction loans to nominal members only if it has an enabling provision in its by-laws, in conformity with the applicable state co-operative Acts, for extending credit facilities to nominal members.

"Subject to the above, a UCB may grant the following loans to nominal members - loans for the purchase of consumer durables subject to a monetary ceiling of Rs 2.5 lakh per borrower, and loans against fixed deposit receipts, gold and silver ornaments, life insurance policies, and government securities, within the monetary ceiling as per its board-approved policy," the RBI statement said.

The proposals were announced as part of the Statement on Developmental and Regulatory Policies dated 6th February, 2026. The draft directions have been issued by the RBI's Department of Regulation for public comments.

The draft amendments cover concentration risk management, credit facilities, and financial statements, presentation and disclosures of Urban Co-operative Banks.

- IANS

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Reader Comments

R
Rohit P
Good step for financial inclusion. Many people in tier 2/3 cities depend on urban co-operative banks. Increasing the consumer durable loan limit to ₹2.5 lakh will boost purchases of appliances, especially during festival seasons. Economy needs this push.
A
Aditya G
While easier credit is good, I hope UCBs don't become reckless. Unsecured loans carry high risk. The 2026 implementation date gives them time to prepare, but supervision is key. RBI must ensure strong risk management policies are actually followed on the ground.
S
Sarah B
The housing loan norms seem practical. A 20-year tenor with a clear moratorium only for construction is a balanced approach. It should prevent speculation in the housing market while helping genuine home builders. The deregulation for larger UCBs (Tier 3/4) shows trust in their governance.
K
Karthik V
As someone who has taken a gold loan from a UCB, I appreciate the clarity on loans against assets. The limit of ₹10 lakh for unsecured loans from higher-tier banks is significant. This could really help middle-class families with education or medical expenses without collateral.
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Michael C
The draft is open for feedback until 2026—that's a long consultation period. Hopefully, it allows for thorough review by all stakeholders. The focus on board-approved policies for larger UCBs is the right move towards more principle-based regulation.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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