The Reserve Bank of India (RBI) has raised the limits on individual housing loans extended by co-operative banks by over 100%, a move that is set to enhance credit flow into the real estate sector.

The central bank has factored in the rise in housing prices since the limits were last last revised and the borrowers’ needs for larger loans.

“...the limits for Tier I /Tier II UCBs (urban cooperative banks) shall stand revised from Rs 30 lakh/ Rs 70 lakh to Rs 60 lakh/ Rs 140 lakh, respectively,” the RBI read.

For rural co-operative banks (RCBs), the limits have been increased from Rs 20 lakh to Rs 50 lakh with assessed net worth less than Rs 100 crore; and from Rs 30 lakh to Rs 75 lakh for the other RCBs.

These limits were last revised for UCBs in 2011 and for RCBs in 2009.

Keeping in mind the growing need for affordable housing, the RBI has decided to permit RCBs (including state co-operative banks and district central co-operative banks) to lend to commercial real estate – residential housing, within the existing aggregate housing finance limit of 5% of their total assets.

"This is set to open a huge financing window in tier II and tier III cities as co-operative banks can now lend funds to developers for housing projects," Colliers India chief executive Ramesh Nair said.

The RBI has also permitted UCBs to offer door-step banking. “In order to attain harmonisation of regulatory framework across Regulated Entities (REs) and to provide convenience of banking services to customers at their door-step, it has been decided to permit UCBs to extend doorstep banking services to their customers on par with scheduled commercial banks,” the RBI said.