RBI lowers single & group borrower exposure limit for UCBs

The Reserve Bank of India (RBI) has revised the single borrower and group exposure limit for Urban Cooperative Banks (UCBs). The exposure limit for Urban Cooperative Banks (UCBs) has been lowered to reduce the concentration risks originating from large loans. It has been revised in the following manner:

RBI has lowered the single borrower exposure limit for urban cooperative banks (UCBs) to 15% of tier I capital. This limit was earlier 15% of tier I and tier II capital.
RBI has lowered the group of borrowers exposure limit for urban cooperative banks (UCBs) to 25% of tier I capital. This limit was earlier 40% of tier I and tier II capital.

According to the RBI, the existing exposures limits for single and group borrowers should be revised by the banks as per the new exposure limits by 31 March 2023. The new limits will also apply to all fresh loans. RBI also stated that the UCBs should have at least 50% of their aggregate loans and advances of not more than Rs 25 lakh or 0.2% of their tier I capital, whichever is higher, up to a maximum of Rs 1 crore, per borrower. While those UCBs which do not aligns with above conditions at present should comply with these norms by 31 March 2024.

RBI has decided to increase the Priority Sector Lending (PSL) target for UCBs from 40% to 75% of the Adjusted Net Bank Credit (ANBC), or Credit Equivalent Amount of Off-Balance Sheet Exposure (CEOBSE). These norms will also have to be fulfilled by 31 March 2024.

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