RBI releases draft norms on loan exposure limits for urban cooperative banks

The Reserve Bank of India (RBI) on December 30 released draft circular on lending norms for Urban Cooperative Banks (UCBs).

The circular stipulates limits for a single borrower and a group of connected borrowers to be at 10 percent and 25 percent, respectively, of their Tier-I capital and at least 50 percent of their loan portfolio shall comprise loans not more than Rs 25 lakh per borrower.

The draft also stipulates that the target for loans and advances to priority sector for UCBs shall stand increased to 75 percent of adjusted net bank credit or credit equivalent amount of off-balance sheet exposure, whichever is higher, by March 31, 2023.

“An appropriate glide path is proposed to be provided to UCBs for compliance with the aforesaid norms/limits/targets,” the banking regualtor said.

RBI said that the new norms are expected to reduce credit concentration risk of the UCBs and promote financial inclusion.

The banking regulator has invited comments on the draft circular by January 20, 2020.