RBI Revises Exposure Limits For Urban Co-operative Banks

On Friday, the Reserve Bank of India (RBI) revised exposure limits for urban cooperative banks (UCBs) to a single borrower and a group of borrowers to 15 percent and 25 percent, respectively, of tier-1 capital.

"On a review, it has been decided that the prudential exposure limits for UCBs for a single borrower and a group of connected borrowers shall be 15 percent and 25 percent, respectively, of their tier-I capital," the RBI said in a notification.

Earlier, UCBs were permitted to have exposures of up to 15 percent and 40 percent of their capital funds to a single borrower and a group of borrowers, respectively.

The revised exposure limits shall be applicable to all types of fresh exposures taken by UCBs and they will have to bring down their existing exposures which are in excess of the revised limits, by 31 March 2023, the RBI said.

For the purpose of fixing the exposure limits, tier-1 capital as on March 31 of the preceding financial year shall be reckoned.

"Tier-1 capital for the purpose will be the same as that prescribed for computation of capital adequacy of UCBs," it said.

UCBs shall have at least 50 percent of their aggregate loans and advances comprising loans of not more than Rs 25 lakh or 0.2 percent of their tier 1 capital, whichever is higher, subject to a maximum of Rs 1 crore, per borrower.

The RBI also increased the overall priority sector lending (PSL) target for UCBs to 75 percent of adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposure (CEOBSE), whichever is higher from 40 percent earlier.

The central bank has also asked UCBs to prepare a board approved action plan for compliance with the revised exposure limits and priority sector lending targets.