The Reserve Bank of India (RBI) on Wednesday increased the limits for individual housing loans being extended by urban cooperative banks (UCBs) and rural cooperative banks (RCBs), by over 100 per cent. Announcing the decision, RBI Governor Shaktikanta Das said it will facilitate better flow of credit to the housing sector.
The individual housing loan limits for UBCs and RCBs were last fixed in 2011 and 2009, respectively, and have now been revised taking into account the increase in house prices.
Ramesh Nair, CEO (India) and MD (market development-Asia) of Colliers, said, “The RBI has clearly emphasised on the significant role cooperative banks can play in expanding higher credit flows into the housing sector while promoting financial inclusion.”
He added that the central bank has revised upwards the upper limit by over 100 per cent up to which urban cooperative banks and rural cooperative banks can lend to homebuyers. “This will enhance higher credit especially in the semi-urban and rural areas where cooperative banks have deeper penetration.”
The RBI has also proposed to permit RCBs (including state cooperative banks and district central cooperative banks) to extend finance to ‘commercial real estate– residential housing’, within the existing aggregate housing finance limit of 5 per cent of their total assets. “The move is in line with the dispensation available to scheduled commercial banks (SCBs) and UCBs. This measure will further augment credit flows from the cooperative banks to the housing sector,” Das said while announcing the decision.
“This will open a huge financing window in tier II and tier III cities. Cooperative banks can now lend funds to developers for housing projects. This is expected to provide a major fillip to affordable housing projects in these cities and tap the strong latent demand,” Colliers’ Nair said.
The RBI also decided to permit UCBs to extend doorstep banking services to their customers. “It has also been decided to permit UCBs to extend doorstep banking services to their customers. This will enable UCBs to meet the needs of their customers, especially senior citizens and differently abled,” Das said.
V Swaminathan, executive chairman of Andromeda and Apnapaisa, said the RBI has considered the cooperative banks as equal partners in the growth, thus raised their lending limit by 100 per cent. “It 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.”
Aarti Khanna, founder and CEO of Askcred.com, said the RBI has increased the existing limits on individual housing loans by cooperative banks both for urban co-operative banks and rural cooperative 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.”
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