What changed
The per-borrower housing loan limit was increased from Rs 5 lakh to Rs 20 lakh, with a higher limit of Rs 30 lakh for banks having net worth of Rs 100 crore or more as per NABARD's latest inspection. The aggregate housing loan outstanding cap was revised from 5% of total deposits to 10% of total loans and advances as of March 31 of the preceding year, with an allowance to exceed this limit using funds from higher financing agencies or NHB refinance. The loan limit for repairs, additions, or alterations to existing houses was raised from Rs 50,000 to Rs 1 lakh.
What it means for you
Co-operative banks can now offer significantly larger housing loans, enabling them to better serve individual borrowers and compete in the housing finance market. The revised aggregate cap based on loans and advances (instead of deposits) provides a more growth-oriented framework, though banks must ensure they do not finance commercial real estate, which remains prohibited. Banks with stronger net worth get an additional advantage with a higher per-borrower limit.
What you must do
- Update internal housing loan policies to reflect the new per-borrower limits of Rs 20 lakh (or Rs 30 lakh for eligible banks).
- Recalibrate aggregate housing loan exposure to ensure it does not exceed 10% of total loans and advances as of March 31 of the previous year.
- Review and adjust loan limits for repairs/additions to existing houses to the revised Rs 1 lakh per borrower.
- Ensure strict compliance with the prohibition on financing commercial real estate under housing loan portfolios.
- Acknowledge receipt of the circular as instructed.
Who it affects
State Co-operative Banks (StCBs), Central Co-operative Banks (DCCBs), Individual borrowers seeking housing loans from co-operative banks, NABARD (as assessing authority for net worth)
What is the new maximum housing loan limit for an individual borrower from a co-operative bank?
The limit is Rs 20 lakh for most StCBs/DCCBs. However, if the bank has a net worth of Rs 100 crore or more as per NABARD's latest inspection, the limit is Rs 30 lakh.
How is the aggregate housing loan cap calculated now?
The aggregate of all housing loans outstanding (to individuals, institutions, and societies) should not exceed 10% of the bank's total loans and advances as on March 31 of the preceding year. This cap can be exceeded if funds are obtained from a higher financing agency or refinance from NHB.
Does this circular allow co-operative banks to lend for commercial real estate?
No. The circular explicitly clarifies that housing loans do not include finance to the commercial real estate sector, which remains prohibited for StCBs and DCCBs as per earlier instructions.