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Co-operative Banks permitted more activities on par with commercial banks

Co-operative banks will be eligible for more services on par with commercial banks. Besides, enhances limits on housing loans, some will now be allowed to lend to commercial real estate. Besides, urban cooperative banks will also be allowed to offer door-step banking services to their customers.

“Taking into account the increase in housing prices, it has been decided to increase the existing limits on individual housing loans by cooperative banks” the Reserve Bank said in its statement on regulatory and developmental policies.

The limits for Tier I /Tier II Urban co-operative banks are revised from Rs 30 lakh/Rs 70 lakh to Rs 60 lakh/Rs 140 lakh, respectively. For rural cooperative banks, the limits will increase from Rs 20 lakh to Rs 50 lakh for banks with assessed net worth less than ?100 crore and from Rs30 lakh to Rs 75 lakh for other RCBs. These limits were last revised for UCBs in 2011 and for RCBs in 2009.

Also, considering the growing need for affordable housing and to realise their potential in providing credit facilities to the housing sector, the RBI has to allow State cooperative banks and district cooperative banks to extend finance to commercial real estate – residential housing within the existing aggregate housing finance limit of 5 percent of their total assets.

However analysts have raised concerns on regulation and supervision challenges arising out of such measures which RBI tried to address. “The customer demand is not generated but met through these measures. Banks now have greater flexibility to meet customer requirements of housing loans” said RBI deputy governor Rajeshwar Rao at the post policy media conference. “ These are subject to prudential safeguards in terms of ceilings, etc that will take care of the risks. We have a system of close monitoring of banking entities and banking units and we are in a position to assess the vulnerability of banks very closely. I don’t see any risks arising out of these measures”.

Separately, to provide convenience of banking services to the customers at their door-step, it has been decided to permit UCBs to extend doorstep banking services to their customers on par with scheduled commercial banks.

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