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

RBI/DOR/2025-26/277 DOR.CRE.REC.196/07-01-005/2025-26 November 28, 2025 Previous Versions Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025 (Updated as on July 15, 2026)

Table of Contents

• Introduction
• Chapter I - Preliminary
• Chapter II - Board Approved Policies
• Chapter III - Digital Lending
• Chapter IV - Lending against Gold and Silver Collateral
• Chapter V - Microfinance
• Chapter VI - Project Finance
• Chapter VII - Non Fund Based (NFB) Credit Facilities
• Chapter VIII - Housing Finance
• Chapter IX - Export Credit
• Chapter X - Loans Against Financial Assets
• Chapter XI - Discounting / Rediscounting of Bills by UCBs
• Chapter XII - Bank Finance to Non-Banking Financial Companies (NBFCs)
• Chapter XIII - Miscellaneous Provisions
• Chapter XIV - Repeal and other provisions
• Annex - I
• Annex - II
• Annex - III
• Annex IV

Introduction

Reserve Bank of India (Reserve Bank) is statutorily mandated to operate the credit system of the country to its advantage. In pursuit of this mandate, the Reserve Bank encourages innovation in the financial systems, credit products and delivery mechanisms while ensuring orderly growth, financial stability and the protection of depositors’ and borrowers’ interest. With the progressive deregulation of bank credit, prudential norms primarily serve as regulatory safeguards. These norms, issued from time to time, provide guidance to Urban Cooperative Banks (UCBs) on the design and delivery of credit-related products and services. These Directions consolidate the instructions issued to Urban Co-operative Banks on credit facilities.

Accordingly, in exercise of powers conferred by Section 21, 35A and 56 of the Banking Regulation Act, 1949, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues these Directions hereinafter specified.

Chapter I - Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025.
2. These Directions shall come into effect immediately upon its issuance, unless indicated otherwise in specific cases.

B. Applicability

3. These Directions shall be applicable to Urban Co-operative Banks (hereinafter collectively referred to as ‘UCBs/banks’ and individually as a ‘UCB/bank’).

In this context, urban co-operative banks shall mean Primary Co-operative Banks as defined under Section 5(ccv) read with Section 56 of Banking Regulation Act, 1949.

C. Definitions

4. (1) For the purpose of these Directions, following definitions shall apply: (i) ‘Actual Date of Commencement of Commercial Operations’ (DCCO) means the date on which the project is put to commercial use and completion certificate / provisional completion certificate / occupancy certificate (in case of CRE and CRE-RH projects) or its equivalent is issued to the concessionaire / project developer / promoter. (ii) ‘Annual Percentage Rate (APR)’ means APR as defined under Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) Directions, 2025. (iii) ‘Appointed Date’ means the date, as defined in the concession agreement entered into between the concessionaire and the concession granting authority, on which the concession agreement comes into force in accordance with the terms outlined therein (applicable only in the case of infrastructure projects under Public Private Partnership (PPP) model). (iv) ‘Beneficiary’ means the party in whose favour the NFB facility is issued by a RE. (v) ‘Bullet Repayment Loans’ means loans where both principal and interest are due for payment at the maturity of the loan. (vi) ‘Co-acceptance of bills’ means an undertaking to make payment to the drawer of the bill (seller / exporter) on due date if the buyer / importer fails to make the payment on that date. (vii) ‘Collateral Security’ or ‘Collateral’ means an existing asset of the borrower pledged to the lender for availing and securing a credit facility extended by the lender to the borrower. (viii) ‘Consumption Loan’ means any permissible loan that does not fit the definition of ‘income generating loan’ as defined subsequently. (ix) ‘Credit Event’ in the context of project finance exposures, shall be deemed to have been triggered on the occurrence of any of the following: (a) Default with any lender. (b) Any lender(s) determines a need for extension of the original / extended DCCO, as the case may be, of the project. (c) Expiry of original / extended DCCO, as the case may be. (d) Any lender(s) determines a need for infusion of additional debt. (e) The project is faced with financial difficulty. Explanation: For the purposes of these Directions, financial difficulty would have the same meaning as specified under the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025. (x) ‘Date of Financial Closure’: Refers to means the date on which the capital structure of the project, including equity, debt, grant (only in the case of infrastructure PPP projects) (if any), accounting for minimum 90% of total project cost, becomes legally binding on all stakeholders. Explanation: In the case of CRE-RH projects, lenders may reckon contingent sales receivables (if any) as part of promoters’ contribution to the project. (xi) ‘Default’ means non-payment of debt (as defined in Insolvency and Bankruptcy Code (IBC), 2016) when whole or any part or instalment of the debt has become due and payable and is not paid by the debtor. (xii) ‘Default Loss Guarantee’ (DLG) means a contractual arrangement, called by whatever name, between the bank and another entity, under which the latter guarantees to compensate the bank, for the loss due to default up to a certain percentage of the loan portfolio of the bank, specified upfront. Any other implicit guarantee of similar nature, linked to the performance of the loan portfolio of the bank and specified upfront, shall also be covered under the definition of DLG. (xiii) ‘Digital Lending’ means a remote and automated lending process, largely by use of seamless digital technologies for customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer service. (xiv) ‘Digital Lending Apps / Platforms’ (DLAs) means a mobile and / or web-based applications, on a standalone basis or as a part of suite of functions of an application with user interface that facilitate digital lending services. DLAs shall include applications of the bank as well as those operated by Lending Service Provider (LSP) engaged by bank for extending any credit facilitation services in conformity with extant outsourcing guidelines issued by the Reserve Bank. (xv) ‘Extended DCCO’: If the original DCCO is revised, then the revised DCCO shall be termed as the Extended DCCO. (xvi) ‘Guarantee’ means a contract to perform the promise, or discharge the liability, of a third person in the contingent case of his non-performance or default, in terms of The Indian Contract Act, 1872. (xvii) ‘Guarantor’ means the party which issues the guarantee. (xviii) ‘Income Generating Loan’ means loans extended for the purpose of productive economic activities, such as farm credit, loans for business or commercial purposes, loans for creation or acquisition of productive assets etc. (xix) ‘Infrastructure Sector’ shall include the sub-sectors included in the Harmonised Master List of Infrastructure sub-sectors issued by the Department of Economic Affairs, Ministry of Finance, Government of India, as updated from time to time. (xx) ‘Interest During Construction’ (IDC) means the interest accrued on debt provided by a lender and capitalised during the construction phase of the project. (xxi) ‘Jewellery’ means items that are designed to be worn as personal adornments. (xxii) ‘Lending Service Provider’ (LSP) means an agent of the bank (including another bank) who carries out one or more of bank’s digital lending functions, or part thereof, in customer acquisition, services incidental to underwriting and pricing, servicing, monitoring, recovery of specific loan or loan portfolio on behalf of the bank in conformity with extant outsourcing guidelines issued by the Reserve Bank. Provided that, while entities offering only Payment Aggregator (PA) services in terms of the extant instructions issued by the Reserve Bank shall remain out of the ambit of these Directions, any PA also performing the role of an LSP shall comply with the Chapter III of these Directions. (xxiii) ‘Obligor’ means a party against whose obligations, financial or otherwise, a NFB facility has been issued. In the case of guarantees, the obligor may also be termed as ‘principal debtor’, as defined under the Indian Contract Act, 1872. (xxiv) ‘Original DCCO’ means the date, as envisaged at the time of financial closure, by which the project is expected to be put to commercial use and completion certificate / provisional completion certificate, or its equivalent, is expected to be issued to the concessionaire / project developer / promoter. Provided that, in the case of CRE and CRE-RH projects, original DCCO shall be the date on which Occupancy Certificate, or its equivalent, is expected to be obtained from the competent authority. (xxv) ‘Ornaments’ means items meant for use as adornment of any object, decorative items, or utensils, excluding those items that fall under the definition of jewellery as defined previously. (xxvi) ‘Post-shipment Credit’ means any loan or advance granted or any other credit provided by the bank to an exporter of goods / services from India from the date of extending credit after shipment of goods / rendering of services to the date of realisation of export proceeds, and includes any loan or advance granted to an exporter, in consideration of, or on the security of any duty drawback allowed by the Government from time to time. (xxvii) 'Pre-shipment / Packing Credit’ means any loan or advance granted or any other credit provided by the bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment / working capital expenses towards rendering of services on the basis of letter of credit opened in his favour or in favour of some other person, by an overseas buyer or a confirmed and irrevocable order for the export of goods / services from India or any other evidence of an order for export from India having been placed on the exporter or some other person, unless lodgement of export orders or letter of credit with the bank has been waived. (xxviii) ‘Primary Gold’ and ‘Primary Silver’ means gold and silver in any form other than in the form of a jewellery, ornaments and coins. (xxix) ‘Project’ in the context of Chapter VI of these Directions to means ventures undertaken through capital expenditure (involving current and future outlay of funds) for creation / expansion / upgradation of tangible assets and / or facilities in the expectation of stream of cash flow benefits extending far into the future. Projects usually have the characteristics of a long gestation period, irreversibility and substantial capital outlays. (xxx) ‘Project Finance’ in the context of Chapter VI of these Directions refers to the method of funding a project in which the revenues to be generated by the funded project serve as the primary security for the loan, and also as a source of repayment. Project finance may take the form of financing the construction of a new capital installation (greenfield) or financing an improvement / enhancement in the existing installation (brownfield). For the purpose of these Directions, an exposure shall qualify as a project finance exposure only if the following conditions are satisfied: (a) The pre-dominant source of repayment as envisaged at the time of financial closure (i.e., at least 51 per cent) must be from cash flows arising from the project which is being financed. (b) All the lenders have a common agreement with the debtor. Explanation: A common agreement may have different loan terms (except original / extended / actual DCCO as specified in paragraph 65 of these Directions) for each of the lender provided the same has been agreed upon by the debtor and all the lender(s) to the project. (xxxi) ‘Restructuring’ means the same meaning as given in the Reserve Bank of India (Urban Co-operative Banks – Resolution of Stressed Assets) Directions, 2025. (xxxii) ‘Resolution Plan’ (RP) means the same as defined under the Reserve Bank of India (Urban Co-operative Banks – Resolution of Stressed Assets) Directions, 2025. (xxxiii) ‘Secured portion of an NFB’ facility means the portion of the facility covered by realisable value of tangible security/ collateral estimated on a realistic basis. (xxxiv) ‘Top-up Loan’ means an additional loan sanctioned over and above an outstanding loan, during the tenor of the original loan, based on the strength of the collateral already pledged for the existing loan. (2) All other expressions unless defined herein shall have the same meanings as have been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934, or any statutory modification or re-enactment thereto or in other relevant regulations issued by the Reserve Bank or as used in commercial parlance, as the case may be.