“ Taking into account the increase in housing prices, it has been decided to increase the existing limits on individual housing loans by cooperative banks” the Reserve Bank said in its statement on regulatory and developmental policies.
The limits for Tier I /Tier II urban co-operative banks are revised from Rs 30 lakh/ Rs 70 lakh to Rs 60 lakh/ Rs 140 lakh, respectively. For rural cooperative banks, the limits will increase from Rs 20 lakh to Rs 50 lakh for banks with assessed net worth less than Rs 100 crore and from Rs 30 lakh to Rs 75 lakh for other RCBs. These limits were last revised for UCBs in 2011 and for RCBs in 2009.
Also, considering the growing need for affordable housing and to realize their potential in providing credit facilities to the housing sector, the RBI has to allow state cooperative banks and district cooperative banks to extend finance to commercial real estate – residential housing within the existing aggregate housing finance limit of 5 percent of their total assets.
“Today’s announcements relating to home loan limits and doorstep banking are welcome steps from the Reserve Bank of India for the co-operative banking sector. The increase in home loan limits by over 100% is a big reformative step, in line with long-standing industry’s request” said Ashish Singhal, Managing Director, SVC Co-operative Bank Ltd. This will lead to increase credit flows to the housing sector and boost revenue growth for the co-operative banking sector. In addition, the doorstep banking will help us bring more personalized attention and convenience to customers especially senior citizens and the differently-abled. These progressive steps will further enable us to offer 360 degree services besides reaffirm our commitment to contribute to the growth of our nation”
However analysts have raised concerns on regulation and supervision challenges arising out of such measures which RBI tried to address. “The customer demand is not generated but met through these measures. Banks now have greater flexibility to meet customer requirements of housing loans” said RBI Deputy Governor Rajeshwar Rao at the post policy media conference. “ These are subject to prudential safeguards in terms of ceilings, etc that will take care of the risks. We have a system of close monitoring of banking entities and banking units and we are in a position to assess the vulnerability of banks very closely. I don’t see any risks arising out of these measures”.
Separately, to provide convenience of banking services to the customers at their door-step, it has been decided to permit UCBs to extend doorstep banking services to their customers on par with scheduled commercial banks.