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RBI’s Twin Announcement On Co-Operative Banks To Boost Affordable Housing

RBI has expanded the individual loan limits that co-operative banks can offer and has allowed rural co-operative banks to extend finance to commercial real estate.

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RBI press conference in Mumbai PTI Photo/Shashank Parade

The Reserve Bank of India (RBI) has hiked the limit of individual housing loans extended by co-operative banks by over 100 per cent.

The Reserve Bank of India (RBI) policy announcement made co-operative banks equal partners in India’s growth story by ensuring their increased participation in the real estate and housing segments.

Hike In Individual Loan Limits

While announcing the monetary policy on Wednesday, RBI Governor Shaktikanta Das said that the co-operative banks would now be able to lend more for individual home loans. This move would ensure better credit flow in the residential housing sector. It comes in the wake of rising residential prices.

"Limits for individual housing loans extended by urban & rural cooperative banks, are being revised upwards by over 100 per cent, considering increase in house prices," Das said.

“The RBI has considered co-operative banks as equal partners in the growth, thus raised their lending limit by 100 per cent, which means that these banks can now lend double the amount that they were doing so far. This move can be seen as a major boost for the real estate sector as it will now enhance the availability of easy credit for the residential housing segment,” says V. Swaminathan, executive chairman, Andromeda and Apnapaisa, a loan distribution firm and its digital arm respectively.

The limits for Tier I and Tier II UCBs (urban co-operative banks) will be revised from Rs 30 lakh/ Rs 70 lakh to  Rs 60 lakh/ Rs 140 lakh, respectively. As regards rural co-operative banks (RCBs), the limits shall increase from  Rs 20 lakh to  Rs 50 lakh with assessed net worth less than Rs 100 crore; and from Rs 30 lakh to Rs 75 lakh for other RCBs.

“RBI has increased the existing limits on individual housing loans by cooperative banks both for urban co-operative banks and rural co-operative banks. This is a welcome move considering that limits were last revised almost a decade ago and with the increase in housing and real estate prices, increasing the limit was needed. This would give some uplift to the affordable housing segment,” says Aarti Khanna, Founder and CEO, Askcred.com, a platform which provides advisory and loan solutions to people with poor credit scores.

Housing Scheme (photo for representational purposes only)
RBI has also allowed RCBs to extend financing to commercial real estate residential projects to augment the credit flow. PTI Photo

Boost To Affordable Housing

RBI has also allowed RCBs to extend financing to commercial real estate residential projects to augment the credit flow.

The measure has been announced in view of the growing needs of the affordable housing sector. “Considering the growing need for affordable housing and to realise their potential in providing credit facilities to the housing sector, it has been decided to allow StCBs (state co-operative banks) and DCCBs (district central co-operative banks) to extend finance to commercial real estate – residential housing (CRE-RH) within the existing aggregate housing finance limit of five per cent of their total assets," the RBI statement added.

Incentives For Senior Citizens

In addition to this, RBI also announced doorstep delivery of services by UCBs to meet the needs of senior citizens. This would further boost the real estate sector, which is the key driver of economic recovery. This move would also boost credit flow in the economy.

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