The Reserve Bank of India (RBI) has proposed significant changes to concentration risk and lending rules for Rural Co-operative Banks (RCBs). Two draft regulations have been released for public feedback: the Reserve Bank of India (Rural Co-operative Banks – Concentration Risk Management) Directions, 2026, and updates to the Rural Co-operative Banks – Credit Facilities Directions, 2025.

The new framework suggests that exposure limits should be 20% of Tier-I capital for a single counterparty and 25% for a group. A higher limit of 30% is proposed for a single Primary Agricultural Credit Society (PACS), compliant with state cooperative laws. The RBI plans to eliminate most existing sectoral exposure limits, but will maintain prudential caps. Aggregate exposure to the sector would be capped at 15% of total loans, with real estate exposure limited to 5%, excluding individual housing loans. Unsecured advances would also be capped at 15% of total loans, with specific limits for individual borrowers based on the bank's size.

Rural co-operative banks with deposits over Rs 10,000 crore may provide housing loans up to Rs 3 crore, while smaller banks have reduced limits based on their deposit size.