What changed
The additional 5% of total assets that UCBs can lend for housing loans now applies to loans up to Rs 15 lakh per individual, instead of the earlier Rs 10 lakh cap. The earlier provisions that allowed exceeding the overall 10% limit using funds from higher financing agencies or NHB refinance have been withdrawn.
What it means for you
UCBs get more room to lend for costlier dwelling units, addressing industry feedback that the Rs 10 lakh cap was too low. The overall 10% exposure limit to housing, real estate, and commercial real estate remains unchanged, but the extra 5% buffer is now more usable. Banks must ensure compliance with all other existing instructions on asset computation and sector exposure.
What you must do
- Update internal lending policies to reflect the revised Rs 15 lakh limit for the additional 5% housing loan window.
- Ensure the overall exposure to housing, real estate, and commercial real estate does not exceed 10% of total assets, plus the additional 5% for eligible housing loans.
- Discontinue reliance on the earlier exemption that allowed exceeding limits via funds from higher financing agencies or NHB refinance.
- Train credit staff on the new eligibility criteria and documentation requirements for loans up to Rs 15 lakh.
Who it affects
Primary (Urban) Co-operative Banks, Housing loan borrowers seeking loans up to Rs 15 lakh, Credit and risk management teams at UCBs
What is the new housing loan limit under the additional 5% window?
UCBs can now lend up to Rs 15 lakh per individual for purchase or construction of dwelling units, using the additional 5% of total assets. Earlier this limit was Rs 10 lakh.
Does this circular change the overall exposure cap for housing and real estate?
No. The overall exposure to housing, real estate, and commercial real estate remains at 10% of total assets. The additional 5% is only for housing loans to individuals up to Rs 15 lakh.
What happens to the earlier exemption for funds from higher financing agencies?
That exemption has been withdrawn. UCBs can no longer exceed the overall 10% limit using funds from higher financing agencies or NHB refinance. All lending must now stay within the prescribed caps.