New real estate exposure norms for urban co-op banks

Business Standard: June 10, 2010

Mumbai: Reserve Bank of India has revised the norms for urban cooperative banks for giving loans to the housing and real estate (RE) segment. Working capital loans to small contractors against hypothecation of construction material are exempted from the existing norms that allows UCBs to use 15 per cent of the total deposits for giving loans for housing and commercial real estate, RBI said. In a communication to chief executive officers of UCBs, RBI said it has fine-tuned the rule for aggregate limit for housing finance. Now, urban banks can use up to 15 per cent of deposits to provide housing, real estate and CRE loans. Earlier, the RBI norm permitted them to use up to 15 per cent of deposits for giving advances to housing loans and other block capital loans. The 15 per cent ceiling was reckoned on total deposits at the end of March 31 of the previous financial year. The exposure to compute the ceiling will include fund and non-fund based facilities extended to customers. Many urban banks and federation of cooperative banks had approached the central bank for clarification on norms that restricts exposure to real estate including housing loan and commercial realty to 15 per cent of deposit base.