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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Reserve Bank of India (Urban Co-operative Banks - Credit Facilities) Directions, 2025

28-Nov-2025 | RBI/DOR/2025-26/277 DOR.CRE.REC.No. /07-01-005/2025-26

RBI has issued RBI (Urban Co-operative Banks - Credit Facilities) Directions, 2025 effective from 28th November 2025. Key Highlights: 1. Applicability - All Urban Co-operative Banks (UCBs) defined under the Banking Regulation Act. 2. Board-Approved Credit Policies - Every UCB must frame comprehensive board-approved policies covering key lending areas such as digital lending, microfinance, housing finance, project finance, gold/silver loans, NBFC financing, etc. 3. Digital Lending Accountability - Banks must conduct strict due diligence on Lending Service Providers (LSPs), ensure transparency through Key Fact Statements (KFS), protect borrower data, prevent misuse of digital apps, and remain fully responsible for all LSP actions. 4. DLG (Default Loss Guarantee) Controls - LSPs may provide loss-sharing up to a maximum of 5% of a fixed loan portfolio. The DLG must be fully backed by enforceable contracts, cannot replace credit appraisal, and must be disclosed monthly. 5. Gold & Silver Loans - UCBs can lend only against jewellery, ornaments, or coins (not primary gold/silver). Loans above Rs. 2.5 lakhs require detailed credit assessment, strict LTV caps apply (75-85%), and valuation must use IBJA/SEBI-recognised prices. 6. Microfinance Lending - Collateral-free loans to households with income up to Rs. 3 lakhs qualify as microfinance. Total loan repayments cannot exceed 50% of household monthly income, and banks must verify and report household income to CICs. 7. Project Finance Framework - Clear rules apply for financing infrastructure and other long-gestation projects' mandatory financial closure, common DCCO across lenders, minimum exposure floors, monitoring via Lender's Independent Engineer, and detailed project databases. For more information, please refer to the attached document.

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