Co-operative banks have welcomed the Reserve Bank of India’s decision to double the limit on housing loans they can provide. Co-operative housing societies also welcomed the move, which they said would help them raise funds at preferential rates.
In a policy review, the apex bank on Wednesday raised the housing loan limit for co-operative banks to Rs 140 lakh from Rs 70 lakh. In addition, rural cooperative banks and central district cooperative banks are now allowed to lend to commercial and residential real estate within the overall housing finance limit of 5 percent of their total assets. In another move, city cooperative banks were allowed to provide door-to-door service to their customers on par with regular commercial banks.
These measures have been welcomed by banks who have been asking for these changes for a long time. Considering their clientele, the urban cooperative banks pointed out that the ceiling on housing loans had led their consumers to migrate to regular commercial banks for housing loans. Also, urban cooperative banks and rural cooperative banks are active in peri-urban areas where they finance industries and commerce. Rural banks and district central cooperative banks have also requested diversification of their portfolio to enable them to reduce the risks associated with their loans. At present, these banks mainly lend to agriculture and agriculture-related businesses that carry inherent risks.
Sudhir Pandit, administrator of Rupee Co-operative Bank, said the changes will allow for a level playing field. “In my view, raising the ceiling on housing loans should increase the business potential of urban and rural cooperative banks. The RBI has taken a good step in the right direction to create a level playing field among all banks. However, the real challenge for cooperative banks is to maintain competitive interest rates and to offer housing loans on liberalized terms. Moreover, by allowing home banking services to co-operative banks, the RBI has truly stated its commitment and support for the co-operative spirit of co-operative banks,” he said.
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Suhas Patwardhan, vice president of the Maharashtra Cooperative Housing Federation, said allowing cooperative banks to enter the mortgage lending business would help cooperative housing seeking redevelopment. Maharashtra, he said, has 1.30 lakh housing corporations and 30,000 apartments. About 30% of them should be redeveloped. “We applied to the RBI to allow us to raise funds from the cooperative banks and the apex bank allowed it. We welcome the decision,” he said.