RBI Proposes Higher Unsecured Loan Limits and Relaxed Norms for UCBs

Reserve Bank of India has issued draft Amendment Directions for Urban Co-operative Banks (UCBs) pursuant to its February 6, 2026 policy statement, inviting public comments by March 4, 2026. The proposals seek to rationalise the definition of unsecured advances, raise individual unsecured loan limits (₹5 lakh for Tier 1, ₹7.5 lakh for Tier 2, and ₹10 lakh for Tier 3 & 4), and increase the aggregate ceiling on unsecured advances to 20% of total loans and advances from the existing 10% of total assets, with limited relaxation for priority sector loans up to ₹50,000 per borrower. Lending to nominal members for consumer durables is proposed to be enhanced to ₹2.5 lakh per borrower. Housing loan tenor and moratorium norms are deregulated for Tier 3 and Tier 4 UCBs, while capped for Tier 1 and Tier 2. Enhanced disclosure requirements on unsecured advances and nominal member lending are also proposed, with implementation from October 1, 2026.

RESERVE BANK OF INDIA

Review of Lending norms for UCBs

In pursuance of the announcement made in the Statement on Developmental and Regulatory Policies dated February 6, 2026, the Reserve Bank of India has today issued the following draft Amendment Directions for public comments, which propose to amend existing Directions issued by the Department of Regulation, RBI:

(i) Reserve Bank of India (Urban Co-operative Banks – Concentration Risk Management) – Amendment Directions, 2026

(ii) Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) – Amendment Directions, 2026

(iii) Reserve Bank of India (Urban Co-operative Banks – Financial Statements: Presentation and Disclosures) – Second Amendment Directions, 2026

2. The above draft Amendment Directions propose to rationalise the definition of unsecured advances, enhance the individual loan limits for such advances and revise the aggregate ceiling for such advances by UCBs to 20% of total advances from the extant ceiling of 10% of total assets. Further, the lending limit to nominal members for purchase of consumer durables is also proposed to be enhanced to ₹2.5 lakh per borrower. Additionally, the tenor and moratorium requirements for housing loans are proposed to be deregulated for Tier 3 and Tier 4 UCBs. Furthermore, certain disclosure requirements are proposed for the UCBs.

3. The comments / feedback on the draft Amendment Directions may be submitted by the regulated entities and other stakeholders / members of public on or before March 4, 2026 through the following channels:

(i) The ‘Connect 2 Regulate’ section on the website by following the corresponding hyperlink provided against each document in the page where they are hosted; or

(ii) by email (as indicated in the ‘Connect 2 Regulate’ section) with the subject line ‘Feedback on (full name of the draft Amendment Directions)’.

Press Release: 2025-2026/2082

(Brij Raj)
Chief General Manager

RBI/2025-26/<>
DOR.CRE.REC.<>/07-03-005/2025-26

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Reserve Bank of India (Urban Co-operative Banks – Concentration Risk Management) – Amendment Directions, 2026 – Draft for comments

Please refer to Reserve Bank of India (Urban Co-operative Banks – Concentration Risk Management) Directions, 2025 (hereinafter referred to as ‘the Directions’).

2. On a review, in exercise of the powers conferred by the Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949; and all other provisions / laws enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions hereinafter specified.

3. The Amendment Directions modifies the Directions as under:

(1). In ‘Chapter I – Preliminary’ of the Directions, the following modifications shall be effected in Paragraph 4:-

(i) Sub-paragraph (6) shall be substituted with following sub-paragraph:

‘Unsecured advances’ shall mean advances, or a portion thereof, not covered by the realisable value of a security (primary as well as collateral) to which the UCB has a valid recourse.

Explanation 1: The realisable value of security shall be estimated on a realistic basis.

Explanation 2: Clean overdrafts; loans against personal guarantee; clean bills purchased or discounted; cheques purchased; and drawals allowed against cheques sent for collection shall be treated as unsecured advances.

Explanation 3: Advances granted to salaried employees against personal guarantee may be treated as secured advances if the Co-operative Societies Act of the State concerned contains an obligatory provision for deduction of periodical loan instalments by the employer out of the employee’s salary / wages to meet the UCB’s claims, and the UCB has implemented this provision in respect of each of such advances.

Explanation 4: Advances against inland D/A bills, including those which are not drawn under letters of credit, having a usance of not exceeding 90 days shall not be treated as unsecured advances.

Explanation 5: Advances against receivables, shall not be treated as unsecured advances as long as such receivables are not overdue for more than 30 days.

(ii) In sub-paragraph (7), after the words ‘temporary period’, the words ‘subject to a maximum period of three years’ shall be inserted.

(2). In ‘Chapter II – Exposure Norms’ of the Directions, the following modifications shall be effected:

(i) Paragraph 19 shall be replaced with following paragraph:

The aggregate unsecured loans and advances granted by a UCB to its members shall not exceed 20 per cent of its total loans and advances as per the audited balance-sheet as on March 31 of the preceding financial year.

Provided that additional unsecured advances above this prudential ceiling shall be permitted only in respect of priority sector eligible loans, subject to a monetary ceiling of ₹50,000 per borrower.

(ii) Paragraphs 20, 21 and 22 shall be deleted.

(iii) In Paragraph 23, the words ‘ranging from ₹0.25 lakh to ₹5 lakh’ shall be replaced with the words ‘specified in Paragraph 203 of the Reserve Bank of India (Urban Co­operative Banks – Credit Facilities) Directions, 2025 (as amended from time to time)’.

(iv) Paragraph 25 shall be replaced with following paragraph:

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 facility to nominal members. Subject to the above, a UCB may grant the following loans to nominal members:

(i) loans for purchase of consumer durables subject to a monetary ceiling of ₹2.5 lakh per borrower;

(ii) 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.

4. The above amendments shall come into force from October 1, 2026, or an earlier date when adopted by a UCB in entirety. It is clarified that adoption by a UCB in entirety shall entail adoption of amendments contained in these Amendment Directions as well as those contained in the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) – Amendment Directions, 2026.

5. With a view to ensuring non-disruptive implementation of amendments issued vide these Amendment Directions, a UCB is permitted to let its existing loans which are not in conformity with these amendments as on the effective date of these Amendment Directions to run-off till maturity. However, the UCB shall not review/renew such loans/ limits after their expiry on same or different terms, even if such renewal is provided in the contract, or enhance the limits sanctioned prior to the date of these Amendment Directions coming into force, unless they are in compliance with amendments issued vide these Amendment Directions.

6. Consequent to the above amendments, corresponding amendment directions viz., Reserve Bank of India (Urban Cooperative Banks – Financial Statements: Presentation and Disclosures) – Second Amendment Directions, 2026 have been separately issued.

Vaibhav Chaturvedi
(Chief General Manager)

RBI/2025-26/<>
DOR.CRE.REC.<>/07-01-005/2025-26

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Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) – Amendment Directions, 2026 – Draft for Comments

Please refer to Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025 (hereinafter referred to as ‘the Directions’).

2. On a review, in exercise of the powers conferred by the Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949; and all other provisions / laws enabling the Reserve Bank of India in this regard, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions hereinafter specified.

3. The Amendment Directions modifies the Directions as under:

(1). In ‘Chapter VIII – Housing Finance’ of the Directions, the following modifications shall be effected:-

(i) Paragraph 116 shall be substituted with the following paragraph:

116. Tenor of housing loans:

(1) For Tier 1 and Tier 2 UCBs, the tenor of housing loans shall not exceed 20 years, including moratorium period.

(2) Tier 3 and Tier 4 UCBs are permitted to determine the tenor of housing loans, including moratorium period, as per their Board-approved policies.

(3) The credit policy of a UCB should, at a minimum, specify risk management and pricing strategies for housing loans considering inter alia the life expectancy of the borrower and the relatively longer duration of these exposures.

(ii) Paragraph 117, shall be substituted with the following paragraph:

117. Moratorium period in housing loans:

(1) Moratorium may be allowed only in cases of housing loans extended for the purpose of construction of houses. Consequently, moratorium shall not be allowed in loans for acquisition of completed houses.

(2) For Tier 1 and Tier 2 UCBs, moratorium periods, if any, in housing loans shall be a maximum of eighteen months from the date of first disbursement of the loan or the date of obtaining the completion / occupancy certificate, whichever is later.

(3) Tier 3 and Tier 4 UCBs may determine the moratorium periods in housing loans, within the overall loan tenor, in accordance with their Board approved policies.

(iii) Paragraph 119 shall be deleted.

(2). In ‘Chapter XIII – Miscellaneous Provisions’ of the Directions, Paragraph 203, shall be substituted with the following paragraph:

203. The limits for individual unsecured advances, within the aggregate ceiling of unsecured advances as mentioned in Reserve Bank of India (Urban Co­operative Banks – Concentration Risk Management) Directions, 2025, shall be as under:

4. The above amendments shall come into force from October 1, 2026, or an earlier date when adopted by a UCB in entirety. It is clarified that adoption by a UCB in entirety shall entail adoption of amendments contained in these Amendment Directions as well as those contained in the Reserve Bank of India (Urban Co-operative Banks – Concentration Risk Management) – Amendment Directions, 2026.

Vaibhav Chaturvedi
(Chief General Manager)

RBI/2025-26/<>
DOR.CRE.REC.<>/21-04-018/2025-26

MM DD YYYY

Reserve Bank of India (Urban Co-operative Banks – Financial Statements: Presentation and Disclosures) – Second Amendment Directions, 2026 – Draft for comments

Please refer to Reserve Bank of India (Urban Co-operative Banks – Financial Statements: Presentation and Disclosures) Directions, 2025 (hereinafter referred to as ‘the Directions’).

2. On a review, consequent to the issuance of the Reserve Bank of India (Urban Co­operative Banks – Concentration Risk Management) – Amendment Directions, 2026, and in exercise of the powers conferred by the sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949 and all other provisions / laws enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions hereinafter specified.

3. The Amendment Directions modifies the Directions as under:

(1) In ‘Chapter-III Disclosure in Financial Statements – Notes to Accounts’, a new sub-sub paragraph (ix) shall be inserted under sub-paragraph 10(5) on Exposures, as given below:

10(5)(ix) Unsecured advances and lending to nominal members

Details of aggregate unsecured advances and lending to nominal members as defined in Reserve Bank of India (Urban Co-operative Banks – Concentration Risk Management) Directions, 2025 shall be disclosed as per the following table:

(Amount in ₹ crore)

4. The above amendments shall come into force from October 1, 2026.

Vaibhav Chaturvedi
(Chief General Manager)