RBI eases lending norms for urban co-op banks

The Reserve Bank of India (RBI) has relaxed lending norms for tier-II urban co-operative banks (UCBs), making it easier for them to lend to commercial real estate and non-banking finance firms (NBFCs).The central bank has rationalised and reduced the standard asset provisioning requirements for tier-II UCBs from 1 to 2 per cent earlier to 0.40 per cent across sectors. It has also slashed risk weights on lending to various sectors.

The provisioning norm in case of direct advances to agriculture and SME sectors, however, is kept unchanged at 0.25 per cent.
According to a central bank circular today, loans and advances to commercial real estate will now attract a risk weight of 100 per cent as against the earlier 150 per cent.

The banking sector regulator has allowed UCBs to fund only asset-financing NBFCs and the risk weight on exposure to such companies remains unchanged at 100 per cent.For tier-I UCBs, the general provision norms on all their standard assets have been kept unchanged at 0.25 per cent.

On November 15, RBI had reduced the standard asset provisioning requirements of banks lending to NBFCs to 0.40 per cent from 2 per cent, except in the case of direct advances to agriculture and SME sectors, where the provisioning requirement remains at 0.25 per cent.Similarly, the central bank had also reduced banks’ risk provisioning for commercial real estate loans to 100 per cent from 150 per cent.