Getting a loan from urban cooperative banks may now become easier. The Reserve Bank of India (RBI) has issued new draft rules that propose allowing these banks to offer more unsecured loans. If implemented, these rules could directly benefit ordinary customers, especially small businesses and the middle class.

The most significant change is the proposed increase in the limit for unsecured loans from 10% to 20% of banks' total assets. This means that urban cooperative banks will now be able to offer twice as many unsecured loans as before. However, the RBI has clarified that additional unsecured loans above 20% will only be granted to priority sectors (such as small farmers and micro-enterprises), up to a limit of ₹50,000 per borrower.

The draft also calls for increasing the personal loan limit and clarifying the definition of unsecured loans. This could simplify the process for small-ticket loan borrowers.

There is also a proposal to increase the loan limit for purchasing consumer durables such as refrigerators, washing machines, and TVs. This could be increased to ₹2.5 lakh per borrower. This could provide relief to middle-income families.

There are also plans to relax some rules related to home loan tenure and moratoriums for third- and fourth-tier urban cooperative banks. This could make housing loan products more flexible.

The RBI has sought suggestions on this draft by March 4, 2026. Additionally, a capacity-building mission will be launched to improve the functioning of cooperative banks, under which a large number of employees will be trained.

The clear objective is to strengthen urban cooperative banks and increase access to credit for small customers.

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