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
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.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!