On Thursday (August 6), the central bank issued two draft regulations for public input: the new Reserve Bank of India (Rural Co-operative Banks – Concentration Risk Management) Directions, 2026, and amendments to the Rural Co-operative Banks – Credit Facilities Directions, 2025.
These proposals stem from the announcements in the RBI’s Statement on Developmental and Regulatory Policies dated August 5.
Under the proposed framework, the RBI suggests prudential exposure limits of 20% of Tier-I capital for individual counterparties and 25% for groups of counterparties. A higher threshold of 30% of Tier-I capital is proposed for exposure to a single Primary Agricultural Credit Society (PACS), subject to applicable state cooperative laws.
The draft also recommends eliminating existing sectoral exposure limits, with the exception of the real estate sector. Instead, RCBs would establish their own Board-approved internal limits for various sectors based on their operational models and risk evaluations.
Regarding the real estate sector, the RBI is proposing to maintain prudential caps. The total exposure to this sector would be limited to 15% of total loans and advances, while exposure to real estate, excluding individual housing loans, would be capped at 5%.
The regulator additionally proposes to cap total unsecured advances at 15% of total loans and advances, setting limits on unsecured lending to individual borrowers according to the bank’s size.
Key proposals aimed at customers include increased housing loan limits. According to the draft, rural co-operative banks with deposits over ₹10,000 crore could approve housing loans up to ₹3 crore per borrower.
The limit would be ₹2 crore for banks with deposits between ₹1,000 crore and ₹10,000 crore, ₹1.4 crore for banks with deposits between ₹100 crore and ₹1,000 crore, and ₹60 lakh for smaller banks. The RBI also suggests providing greater operational flexibility for larger RCBs.
Banks with deposits over ₹1,000 crore would have the authority to decide on the tenure and moratorium period for housing loans through Board-approved policies. For other RCBs, the maximum housing loan tenure would be capped at 20 years, including any moratorium, with the moratorium for under-construction properties limited to 24 months.
Furthermore, the draft proposes allowing loans to nominal members when permitted by the bank’s bylaws and relevant cooperative laws. Such lending would be limited to loans secured by deposits, gold or silver ornaments, life insurance policies, and government securities, within Board-approved limits.
The RBI has requested feedback from regulated entities and other stakeholders on the draft regulations until August 28, 2026. If finalized, the revised guidelines would take effect on April 1, 2027.
