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Business News/ Industry / Banking/  Rural co-op banks can lend to realty firms
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Rural co-op banks can lend to realty firms

Considering the growing need for affordable housing and to realize their potential in providing credit facilities to the housing sector, the regulator said it has decided to allow urban cooperative banks to lend to such projects

Photo: iStockPremium
Photo: iStock

MUMBAI : The Reserve Bank of India (RBI) Wednesday allowed rural cooperative banks to lend to property developers for building residential housing projects in a move that could improve liquidity in the segment.

State cooperative banks and district central cooperative banks were so far barred from extending loans to the commercial real estate sector. Considering the growing need for affordable housing and to realize their potential in providing credit facilities to the housing sector, the regulator said it has decided to allow urban cooperative banks to lend to such projects. Builder loans for residential projects would, however, be included within the existing aggregate housing finance limit of 5% of the assets of rural cooperative banks.

Interestingly, RBI has been tightening norms for cooperative banks in the aftermath of the Punjab and Maharashtra Cooperative (PMC) Bank crisis in 2019. That said, loans to developers is a tricky subject as seen in the PMC case, whose exposure to realty firm HDIL was over 70% of its total loans.

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ABOUT THE AUTHOR
Shayan Ghosh
Shayan Ghosh is a national editor at Mint reporting on traditional banks and shadow banks. He has over 12 years of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Published: 09 Jun 2022, 01:20 AM IST
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