The Reserve Bank of India (RBI) has proposed major changes to lending rules for Rural Cooperative Banks (RCBs).
The new rules could make it easier for some customers to get bigger home loans while also introducing stricter limits to control lending risks.
The RBI released two draft regulations on August 6, 2026, and has invited feedback from banks and other stakeholders. The proposals follow regulatory measures announced by the central bank on August 5.
Housing Loan Limit May Increase to ₹3 Crore
One of the biggest proposed changes is an increase in housing loan limits. The maximum amount a customer can borrow will depend on the size of the rural cooperative bank.
RCBs with deposits above ₹10,000 crore may be allowed to offer housing loans of up to ₹3 crore per borrower. Banks with deposits between ₹1,000 crore and ₹10,000 crore could offer loans of up to ₹2 crore.
For banks with deposits between ₹100 crore and ₹1,000 crore, the proposed limit is ₹1.4 crore. Smaller banks may be allowed to provide housing loans of up to ₹60 lakh.
Bigger Banks Could Get More Flexibility
The RBI also wants to give larger rural cooperative banks more freedom in deciding home loan terms.
RCBs with deposits of more than ₹1,000 crore could decide the housing loan tenure and moratorium period under policies approved by their boards.
For other RCBs, the maximum housing loan tenure would remain 20 years, including the moratorium period. For under-construction properties, the moratorium could be up to 24 months.
New Limits to Reduce Lending Risks
The RBI has proposed new exposure limits to prevent banks from lending too much to a single borrower or connected group.
Under the draft rules, exposure to a single borrower or entity would generally be limited to 20% of the bank’s Tier-1 capital. For a group of connected counterparties, the limit would be 25%.
For a single Primary Agricultural Credit Society (PACS), the exposure limit could go up to 30% of Tier-1 capital, subject to applicable state cooperative laws.
The RBI has also proposed removing most existing sector-specific exposure limits. Instead, banks would set their own board-approved limits based on their business models and risk assessments.
Real Estate and Unsecured Loans Face Caps
The real estate sector would continue to have specific restrictions. Total exposure to real estate could be limited to 15% of a bank’s total loans and advances.
Within this, exposure to real estate other than individual housing loans would be capped at 5%.
The RBI has also proposed limiting total unsecured advances to 15% of total loans and advances. Separate limits for unsecured loans to individual borrowers would depend on the size of the bank.
Loans for Nominal Members Also Proposed
Another proposal would allow RCBs to provide loans to “nominal members” where permitted under the bank’s bylaws and applicable cooperative laws.
Such loans could be provided against deposits, gold or silver jewellery, life insurance policies and government securities. Banks would have to follow limits approved by their boards.
When Could the New RBI Rules Start?
These rules are currently only proposals and have not yet been finalised. The RBI has invited comments and suggestions from regulated entities and other stakeholders until August 28, 2026.
If approved, the revised rules are expected to come into effect from April 1, 2027.
This means rural cooperative bank customers could eventually get access to higher housing loan limits, while banks would have to follow stronger risk-control measures.
