RBI caps unsecured lending, tightens housing loan norms for UCBs
Mumbai, Apr 29, 2026
RBI has issued revised lending norms for urban co-operative banks, capping unsecured loans and tightening housing loan rules to strengthen risk management practices
The Reserve Bank of India (RBI) on Wednesday has issued final guidelines on revised lending norms for Urban Cooperative Banks (UCBs) streamlining credit rules, and strengthening risk-management practices across the sector.
In the final norms, RBI has limited the aggregate unsecured loans and advances at 20 per cent of its total loans, while also setting limits of unsecured individual unsecured loan at ₹5 lakh for Tier-1 UCBs, ₹7.5 lakh for Tier-II and ₹10 lakh for Tier-III and Tier-IV UCBs.
Futhermore, unsecured advances up to ₹50,000 crore per borrower, which are eligible to be categorised as priority-sector loans shall not be calculated under 20 per cent unsecured lending limit for UCBs, which are compliant with RBI’s Eligibility Criteria for Business Authorisation (ECBA).
The RBI has also tightened norms on housing loans extended by UCBs. For Tier-I and Tier-II UCBs, the tenure of housing loans has been capped at 20 years, including any moratorium period. Moratoriums, in turn, will now be permitted only for under-construction properties and limited to a maximum of 24 months, effectively disallowing deferment benefits for ready-to-move-in housing purchases. Larger UCBs (Tier-III, Tier-IV) have been given flexibility to determine loan tenures under board-approved policies.
Further, RBI has also barred UCBs from extending loans against fixed deposits issued by other banks, a step aimed at reducing interconnected risks within the banking system. UCBs will now be required to put in place board-approved policies governing lending against deposits, including margin requirements.
Certain categories such as clean overdrafts and loans backed solely by personal guarantees will be treated as unsecured, while salary-linked loans may qualify as secured exposures if backed by enforceable employer arrangements.
The guidelines will come into effect from October 1, 2026, although UCBs have the option to adopt them earlier before the date.
[The Business Standard]
