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Banks (Finance)

RBI Imposes 5% Limit on Housing Loans for Cooperative Banks

Strategic Insights

— 1 min read

The Reserve Bank of India (RBI) has announced a revised limit of 5% on housing loans for state cooperative banks (StCBs) and central cooperative banks (CCBs), effective immediately. This move restricts the exposure of these banks to real estate and aims to curtail the risk associated with housing finance. The decision requires banks to bring down their existing exposure to the new limit within six months, failing which they will need to take corrective action. Previously, these banks were allowed to extend housing finance up to 10% of their total loans and advances.

Key Takeaways:

  • The RBI has set a 5% limit on housing loans for StCBs and CCBs, effective immediately, replacing the previous limit of 10% of total loans and advances.
  • The new limit is based on the audited balance sheet as on March 31 of the preceding financial year.
  • Banks with existing exposure exceeding the new limits have six months to reduce it to the revised limits.
  • The revised limit is aimed at curbing the risk associated with housing finance and reducing exposure to real estate.
  • The RBI notification allows banks with a net worth of Rs 100 crore and above to make house loans up to Rs 30 lakh, while others are restricted to Rs 20 lakh (US$43,888) per borrower.
  • The RBI has not specified any further penalties or measures for non-compliance with the revised limit.

Statistics:

  • 5%: The revised limit of housing loans for StCBs and CCBs as a percentage of their total assets.
  • 10%: The previous limit of housing loans for StCBs and CCBs as a percentage of their total loans and advances.
  • 6 months: The time period within which banks must reduce their existing exposure to the new limit.
  • Rs. 20 lakh (US$43,888) and Rs. 30 lakh: The maximum loan amounts for individual borrowers for banks with lower and higher net worth, respectively.
  • March 31: The cutoff date for calculating the audited balance sheet used to determine the bank's assets.

Sources:

  • MUMBAI, Jan 24 Asia Pulse
  • PTI

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