RBI draft for State and Central Co-operative Banks: exposure capped at 20% of Tier-I capital per borrower and 25% per group, new housing loan ceilings proposed from 1 April 2027

What RBI has proposed

In its Statement on Developmental and Regulatory Policies of 5 August 2026, RBI said the concentration risk norms for Rural Co-operative Banks (RCBs) are governed by the Credit Monitoring Arrangement instructions issued in 2008, and that it would review them. On 6 August 2026 it issued two drafts for public comments:

• Draft Reserve Bank of India (Rural Co-operative Banks – Concentration Risk Management) Directions, 2026, to replace the 2025 Directions of the same name; and
• Draft Reserve Bank of India (Rural Co-operative Banks – Credit Facilities) Amendment Directions, 2026.

RCBs here means State Co-operative Banks and Central Co-operative Banks. Both drafts propose to come into effect on 1 April 2027. They are proposals, not final rules.

Proposed exposure limits

Tier-I capital is taken as on 31 March of the preceding financial year. Food credit through a food credit consortium, and loans against the bank’s own term deposits with sufficient margin, are exempt from the single and group limits. Each bank would define a ‘group’ in a Board-approved policy and fix its own internal sectoral limits; exposure to real estate stays within the prescribed cap.

Housing loans and unsecured advances

Loans for repairs, additions and alterations would be capped at 10% of the housing loan limit, within that limit. For RCBs with deposits up to ₹1,000 crore, the housing loan tenor would not exceed 20 years including moratorium, and the moratorium would run up to completion of construction, subject to 24 months from first disbursement. Larger RCBs would set tenor and moratorium through Board-approved policies. A moratorium would be allowed only for under-construction houses.

Other proposed changes

• A definition of ‘nominal member’, and permission to lend to nominal members against deposits, gold and silver ornaments, life insurance policies and government securities, if the by-laws allow.
• Deletion of the section on prior authorisation from NABARD (paragraph 118 and Annex III) and of the section on graduated instalments.

Exposures already above the limits

For exposures in breach as on 1 April 2027, the draft proposes: no fresh limits to such borrowers until the exposure is within the ceiling; existing term loans and non-fund-based facilities may run off till maturity; cash credit and similar revolving limits may be used but are to be rationalised within three years, in consultation with the borrower.

What banks should do

The comment window closed on 28 August 2026. Until final Directions are issued, RCBs can use the draft to identify borrowers, real estate exposure and unsecured advances that would exceed the proposed limits.