The Reserve Bank on Monday instructed state and central co-operative banks to desist from financing the commercial real estate sector, as exposure in this sensitive area would not be in their interest.
The Reserve Bank of India (RBI) reminded that the primary role of these banks is to lend for activities related to agriculture and rural development.
"... State and Central Cooperative Banks should desist from financing the commercial real estate sector," the RBI said in a notification to the banks.
The central bank said it has come to its notice that certain state cooperative and central cooperative banks have extended finance to the sector.
"Further, taking exposure in sensitive areas would not be in the interest of Short Term Cooperative Credit Structure," it said.
As regards the credit facilities already extended to the sector, the apex bank said it should be ensured that such exposures are well secured and adequate provisioning made as per the existing prudential guidelines.
"It may also be ensured that the credit facilities are not renewed," the RBI said.