Cooperative banks welcome RBI’s move doubling their home loan limits

In a policy review, the apex bank on Wednesday raised the limit of housing loans for cooperative banks to Rs 140 lakh from Rs 70 lakh. Also rural cooperative banks and district central cooperative banks have now been allowed to lend to commercial and residential real estate within the aggregate housing finance limit of 5 per cent of their total asset. In another move, urban cooperative banks have been allowed to provide doorstep service to their customers on par with scheduled commercial banks.

These moves have been welcomed by the banks which have been asking for these changes for long. Given their customer base, urban cooperative banks have pointed out that capping of housing loans had led to their consumers migrating to scheduled commercial banks when it came to home loans. Also, urban cooperative banks and rural cooperative banks are active in the peri-urban areas where they finance industries and commerce. Rural banks and district central cooperative banks have also asked for diversification of their portfolio to allow them to de-risk their lending. At present, these banks lend mainly to agriculture and agriculture-related businesses which have inherent risks associated with them.

Sudhir Pandit, administrator of Rupee Co-operative Bank, said these changes will allow a level playing field. “In my opinion, enhancing the ceiling on housing loans is expected to boost the business potential for urban and rural cooperative banks. The RBI has taken a good step in the right direction to bring about a level playing field amongst all banks. However, the real challenge for cooperative banks is to keep interest rates competitive and offer housing loans on liberalised terms. Further, by allowing doorstep banking to cooperative banks, the RBI has really enunciated its commitment and support to the cooperative spirit of cooperative banks,” he said.

Suhas Patwardhan, vice president of the Maharashtra Cooperative Housing Federation, said that allowing cooperative banks to enter the home loans sector would help the cooperative housings which are looking for redevelopment. Maharashtra, he said, has 1.30 lakh housing societies and 30,000 apartments. Around 30 per cent of them would have to go for redevelopment. “We have been asking the RBI to allow us to raise finances from the cooperative banks and the apex bank has allowed this. We welcome the decision,” he said.