The central bank on Thursday (August 6) released two draft regulations for public comments, a new Reserve Bank of India (Rural Co-operative Banks – Concentration Risk Management) Directions, 2026, and amendments to the Rural Co-operative Banks – Credit Facilities Directions, 2025.
The proposals follow the announcements made in the RBI’s Statement on Developmental and Regulatory Policies on August 5.
Under the draft framework, the RBI has proposed prudential exposure limits of 20% of Tier-I capital for a single counterparty and 25% for a group of counterparties. A higher limit of 30% of Tier-I capital has been proposed for exposure to a single Primary Agricultural Credit Society (PACS), subject to the relevant state cooperative laws.
The draft also proposes to withdraw existing prescribed sectoral exposure limits, except for the real estate sector. Instead, RCBs would be required to set their own Board-approved internal limits for sectors and sub-sectors based on their business models and risk assessment.
For the real estate sector, the RBI has proposed retaining prudential caps. Aggregate exposure to the sector would be limited to 15% of total loans and advances, while exposure to real estate other than individual housing loans would be capped at 5%.
The regulator has also proposed capping aggregate unsecured advances at 15% of total loans and advances, while prescribing limits on unsecured lending to individual borrowers based on the size of the bank.
Among the key customer-facing proposals are higher housing loan ceilings. Under the draft, rural co-operative banks with deposits exceeding ₹10,000 crore could sanction housing loans of up to ₹3 crore per borrower.
The limit would be ₹2 crore for banks with deposits between ₹1,000 crore and ₹10,000 crore, ₹1.4 crore for banks with deposits between ₹100 crore and ₹1,000 crore, and ₹60 lakh for smaller banks.The RBI has also proposed greater operational flexibility for larger RCBs.
Banks with deposits above ₹1,000 crore would be allowed to determine the tenure and moratorium period for housing loans through Board-approved policies. For other RCBs, the maximum housing loan tenure would be 20 years, including any moratorium, with the moratorium capped at 24 months for under-construction properties.
The draft further proposes permitting loans to nominal members, where allowed under the bank’s by-laws and applicable cooperative laws. Such lending would be restricted to loans backed by deposits, gold or silver ornaments, life insurance policies and government securities, within Board-approved limits.
The RBI has invited comments from regulated entities and other stakeholders on the draft regulations until August 28, 2026. If finalised, the revised directions would come into effect from April 1, 2027.
