The Reserve Bank of India (RBI) on Friday (March 13, 2020) lowered the single borrower and group exposure limit for urban cooperative banks (UCBs) to 15% and 25% of tier I capital, respectively, to reduce concentration risks arising out of such large loans. As per RBI Cir.No.44/13.05.00/2004-05 dated April 15, 2005, Primary (Urban) Co-operative Banks (UCBs) were permitted to have exposures up to 15 percent and 40 percent of their capital funds to a single borrower and a group of borrowers, respectively. As per the said notification, the revised exposure limits shall apply to all types of fresh exposures and UCBs shall bring down their existing exposures which are in excess of the revised limits to within the aforesaid revised limits by March 31, 2023. However, where the existing exposure comprises only term loans and non-fund-based facilities, while no further exposure shall be taken on such borrowers, these facilities may be allowed to continue as per their respective repayment schedule / till maturity. All other extant instructions on the subject, including the definition of exposure, will remain unchanged, it said. While the revised exposure limits will apply to all fresh loans, UCBs should have at least 50% of their aggregate loans and advances of not more than ₹25 lakh, or 0.2%, of their Tier I capital, whichever is higher, up to a maximum of Rs.1 crore, per borrower. The circular further said that those UCBs which do not comply with these norms at present, need to conform by 31 March 2024.
Revised Priority Sector Lending Target:
On a review of the Priority sector lending target, RBI said that the overall PSL target for UCBs shall stand increased to 75 percent of ANBC or CEOBSE, whichever is higher. UCBs shall comply with the above target by March 31, 2024.In terms of earlier circular DCBR.BPD (PCB).Cir.No.07/09.09.002/2017-18 dated May 10, 2018, the overall priority sector lending (PSL) target for UCBs stood at 40% of the adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposure (CEOBSE), whichever is higher. On a review, it has been decided that the overall PSL target for UCBs shall stand increased to 75 percent of ANBC or CEOBSE, whichever is higher. UCBs shall comply with the above target by March 31, 2024.