RBI revises exposure limits for urban cooperative banks to single, group borrowers

The Reserve Bank of India on Friday revised exposure limits for urban cooperative banks (UCBs) to a single borrower and a group of borrowers to 15 per cent and 25 per cent, respectively, of tier-1 capital.

The RBI had earlier permitted UCBs to have exposures up to 15 per cent and 40 per cent of their capital funds to a single borrower and a group of borrowers, respectively.

"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 per cent and 25 per cent, respectively, of their tier-I capital," the RBI said in a notification.

The revised exposure limits shall be applicable to all types of fresh exposures taken by UCBs.

UCBs shall bring down their existing exposures which are in excess of the revised limits to within the revised limits by March 31, 2023, the RBI said.

The RBI said tier-1 capital as on March 31 of the preceding financial year shall be reckoned for the purpose of fixing the exposure limits.

"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 per cent of their aggregate loans and advances comprising loans of not more than Rs 25 lakh or 0.2 per cent 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 per cent of adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposure (CEOBSE), whichever is higher from 40 per cent earlier.

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