Rural co-operative banks may soon lend a lot more for housing, with the RBI proposing fresh borrower exposure limits for these banks.

On Thursday, August 6, the RBI put out two draft regulations for public feedback. One is a brand new set of concentration risk rules for Rural Co-operative Banks, or RCBs.

The other updates the credit facilities framework these banks already follow. Start with the housing loan change, since that’s the one people will actually feel.

RCBs currently work with fairly tight lending caps. Under the new draft, a bank with deposits above Rs 10,000 crore could lend up to Rs 3 crore to one borrower for a home.

Banks with deposits between Rs 1,000 crore and Rs 10,000 crore get a Rs 2 crore ceiling. Smaller banks, with deposits between Rs 100 crore and Rs 1,000 crore, can go up to Rs 1.4 crore. The smallest ones are capped at Rs 60 lakh.

Bigger RCBs also get more say over their own loan tenure and moratorium periods. Smaller banks still stick to a 20 year maximum tenure, with a two year cap on moratoriums for under construction homes.

Then there’s the risk side. In simple terms, the RBI is telling these banks not to put too many eggs in one basket. A single borrower can’t take up more than 20% of a bank’s Tier-I capital, and a group of related borrowers is capped at 25%.

That limit goes up to 30% for a single Primary Agricultural Credit Society. Most sector-wise lending caps are being scrapped altogether, except in real estate, where a 15% ceiling on total exposure stays.

Unsecured loans are getting capped too, at 15% of total advances. None of this is happening in isolation.

The RBI flagged this review earlier, at its August 3 to 5 monetary policy meeting, where it also held the repo rate steady at 5.25%.

Comments on the draft are open until August 28, 2026. If finalised as written, the new rules kick in from April 1, 2027.

Ready to invest like a pro? Tradz by EquityPandit app equips you with 100+ Free tools and knowledge you need to succeed. Download the Tradz by EquityPandit app and gain access to daily stock lists and insightful market analysis and much more!