The Reserve Bank of India has revised prudential norms for urban co-operative banks in order to allow greater operational flexibility without diluting regulatory objectives.The UCBs are required to have at least 50% of their aggregate loans and advances comprising small-value loans, according to a notification on Monday.The central bank has increased the value of loans to not more than Rs 25 lakh or 0.4% of their Tier I capital, whichever is higher, from 0.2% earlier. Of the total tier-I capital, the RBI has increased the borrower cap to Rs 3 crore per borrower from Rs 1 crore earlier.All other conditions, as well as the timelines and the intermediate targets remain unchanged. However, boards of the UCBs should periodically review the portfolio behaviour and quality under different loan-size categories and may consider fixing lower ceilings wherever necessary, the RBI said.It has also revised the aggregate exposure of a UCB to housing, real estate and commercial real-estate loans. For residential mortgages that are housing loans to individuals, the RBI has decided to cap the aggregate exposure of a UCB to not exceed 25% of its total loans and advances.The central bank has also introduced individual housing loan limits for the UCBs, starting with Tier 1 at Rs 60 lakh per dwelling unit, Tier 2 at Rs 1.4 crore, Tier 3 at Rs 2 crore and Tier 4 at Rs 3 crore.Aggregate exposure of a UCB to the real-estate sector, excluding housing loans to individuals, should not exceed 5% of its total loans and advances. The RBI has also extended the five-year timeline for provisioning requirement for investment in security receipts to 2027–28 from the previous deadline of 2025–26.RBI Allows Withdrawal Of Rs 25,000 For New India Co-operative Bank DepositorsCo-operative banks play a vital role in India's financial ecosystem, particularly in promoting financial inclusion and supporting rural development.Over the years, various reforms have been initiated to strengthen the co-operative banking sector by addressing issues relating to dual regulation of the sector, greater freedom to co-operative banks to raise capital and deposit insurance reforms to strengthen depositors' confidence in the sector.Earlier this month, the RBI imposed business restrictions on New India Co-operative Bank and superseded the bank's board due to concerns over poor governance. This action came a day after the RBI imposed several restrictions on the bank, including a six-month ban on issuing new loans and suspending deposit withdrawals.IIFL Finance's Earnings May Be Capped By Weak Loan Quality, Narrower Interest Spreads: Fitch . Read more on Economy & Finance by NDTV Profit.