Executive Summary:
This circular from the Reserve Bank of India revises exposure limits for single and group borrowers and increases priority sector lending (PSL) targets for Primary Urban Cooperative Banks (UCBs). UCBs must reduce existing exposures exceeding the new limits by March 31, 2023, and meet the PSL target of 75% of ANBC or CEOBSE by March 31, 2024, with interim milestones. UCBs are required to create and monitor an action plan for compliance.
Key Points / Main Content:
Prudential Exposure Limits:
* The exposure limit for single borrowers/parties is now 15% of Tier I capital.
* The exposure limit for a group of connected borrowers/parties is now 25% of Tier I capital.
* These revised limits apply to all new exposures.
* Existing exposures exceeding the revised limits must be brought down by March 31, 2023.
* Term loans and non-fund-based facilities can continue as per their repayment schedule.
* Tier I capital as of March 31 of the preceding financial year will be used for fixing exposure limits.
* Definition of connected borrowers/parties remains as per the Master Circular dated July 1, 2015.
* All other existing instructions on exposure remain unchanged.
Loans and Advances:
* UCBs should have at least 50% of their aggregate loans and advances comprising loans of not more than ₹25 lakh or 0.2 of their tier I capital, whichever is higher, subject to a maximum of ₹1 crore, per borrower/party.
* UCBs must comply with this requirement by March 31, 2024.
Revised Priority Sector Lending Target:
* The overall PSL target for UCBs is increased to 75% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure (CEOBSE), whichever is higher.
* UCBs must meet this target by March 31, 2024, according to the following schedule:
* March 31, 2021: 45% of ANBC or CEOBSE
* March 31, 2022: 50% of ANBC or CEOBSE
* March 31, 2023: 60% of ANBC or CEOBSE
* March 31, 2024: 75% of ANBC or CEOBSE
* Existing sub-targets under the priority sector remain unchanged.
Action Plan and Monitoring:
* UCBs must prepare an Action Plan, approved by their Board, for compliance.
* UCBs must establish a mechanism to regularly monitor progress.
Board Notification:
* A copy of the circular must be placed before the UCB's Board of Directors in its next meeting.
* Confirmation of this placement must be sent to the Regional Office of the Department of Supervision, Reserve Bank of India.
Impact Analysis:
Primary Urban Cooperative Banks (UCBs):
Impact: UCBs are subject to stricter exposure limits and higher priority sector lending targets, potentially impacting their lending strategies and portfolio composition.
Action Required: UCBs must revise their lending policies to comply with the new exposure limits, create and implement an action plan for achieving the revised PSL targets, monitor progress, and report to the RBI.
Borrowers:
Impact: Single borrowers and borrower groups may face restrictions on the amount of credit they can obtain from UCBs.
Action Required: Borrowers exceeding the new exposure limits may need to explore alternative funding sources or adjust their borrowing strategies.
Reserve Bank of India (RBI):
Impact: The RBI aims to reduce concentration risk in UCB exposures and promote financial inclusion through enhanced priority sector lending.
Action Required: The RBI will monitor UCBs' compliance with the revised guidelines and assess the impact on the UCB sector and financial inclusion.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system.
Primary Urban Cooperative Banks (UCBs): Cooperative banks operating in urban areas in India, regulated by the RBI.
Priority Sector Lending (PSL): A scheme by Reserve Bank of India, where banks are required to allocate a certain percentage of their lending to specified sectors like agriculture, small businesses, etc.
Tier I capital: The core capital of a bank, consisting of equity capital and disclosed reserves.
Adjusted Net Bank Credit (ANBC): A measure used by the Reserve Bank of India to calculate the priority sector lending target for banks.
Credit Equivalent Amount of Off-Balance Sheet Exposure (CEOBSE): Represents the potential credit risk associated with off-balance sheet items.
Mumbai, Maharashtra: A city in India where Central Office of Department of Regulation, Reserve Bank of India is located
Department of Regulation, Reserve Bank of India: A department of Reserve Bank of India
भारतीय �रज़वर् बक�
__________________________RESERVE BANK OF INDIA________________________
www.rbi.org.in
RBI/2019-20/171
DOR (PCB).BPD.Cir No.10/13.05.000/2019-20 March 13, 2020
The Chief Executive Officer
All Primary (Urban) Co-operative Banks
Dear Sir / Madam,
Limits on exposure to single and group borrowers/parties and large exposures and
Revision in the target for priority sector lending – UCBs
Please refer to paragraph 1 of the Statement on Developmental and Regulatory Policies dated
December 5, 2019 (extract enclosed) and the subsequent draft circular on the subject issued
on the RBI website, vide Press Release 2019-2020/1541 dated December 30, 2019, for
eliciting comments from the stakeholders. After examining the comments received in this
regard, the final guidelines on the subject are given below.
2. Prudential Exposure Limits
2.1 In terms of our circular UBD.DS. 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 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, henceforth, the prudential exposure limits for UCBs for
a single borrower/party and a group of connected borrowers/parties shall be 15 per cent and
25 per cent, respectively, of their tier-I capital.
2.1.1 The revised exposure limits shall apply 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 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.
2.1.2 Tier-I capital as on March 31 of the preceding financial year shall be reckoned for
the purpose of fixing the exposure limits. Tier-I capital for the purpose will be the same
as that prescribed for computation of capital adequacy of UCBs (vide Master Circular
dated July 1, 2015 on Prudential Norms on Capital Adequacy), as amended from time to
time.
िविनयमन िवभाग क��ीय कायार्लय, सी पहली मंिज़ल बान्�ाकुलार् सकं ुल बान्�ा पूवर्,मुंबई , भारत
, फोन: ( -) 7 , 1112 ई म ,ेल: cgm -dcbrco@r ,b i.org.in ( ) - 400051
Department of Regulation, Central O02ff2ice2,6 C57-7, 1st ; Floor, Bandra-Kurla Complex, Mumbai - 400051, India
Phone: (022) 26571112; E-mail: cgmdcbrco@rbi.org.in
ब�क िहन्दी म� प�ाचार का स्वागत करता ह ै—
चेतावनी भारतीय �रज़व र्ब�क �ारा ईमेल डाक एसएमएस या फोन कॉल के ज�रये कोई भी �ि�गत जानकारी जैसे ब�क खाते का ब्यौरा पासवड र्आ�द नह� माँगा जाता ह।ै यह धन रखने या
दने े का �स्ताव भी नह� करता ह।ै ऐसे �स्ताव� का �कसी भी �कार से जवाब मत दीिजए।
: Caution: RBI never- sen,ds m,ails, SMSs or makes calls asking for personal information like bank acc,ount details, passwords, etc.
It never keeps or offers funds to anyone. Please do not respond in any manner to su ch offers.2.1.3 Whether borrowers/parties belong to a ‘group of connected borrowers/parties’ shall
be determined based on the instructions contained at para 2.2.3 and 2.2.4 of the Master
Circular DCBR.CO.BPD. (PCB) MC No.13/13.05.000/2015-16 dated July 1, 2015, as
amended from time to time.
2.1.4 All other extant instructions on the subject, including the definition of exposure, will
remain unchanged.
2.2 UCBs shall have at least 50 per cent of their aggregate loans and advances comprising
loans of not more than ₹25 lakh or 0.2% of their tier I capital, whichever is higher, subject to a
maximum of Rs.1 crore, per borrower/party. Tier I capital for this purpose shall be reckoned in
the manner provided in paragraph 2.1.2 above. Notwithstanding the above, UCBs shall adhere
to the revised exposure limits stipulated at para 2.1 above. UCBs which do not, at present,
comply with the prescribed threshold shall be in conformity with the above requirements by
March 31, 2024.
2.2.1 It is clarified that ‘loans’ for the purpose shall include all types of funded and non-
funded exposures in the nature of credit.
3. Revised Priority Sector Lending Target
3.1 In terms of the 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 per cent of ANBC or CEOBSE, whichever is higher.
3.1.1 UCBs shall comply with the above target by March 31, 2024 as per the following
milestones:
PSL targets to be achieved by
March 31, March 31, March 31, March 31,
2021 2022 2023 2024
45% of 50% of 60% of 75% of
ANBC or ANBC or ANBC or ANBC or
CEOBSE, CEOBSE, CEOBSE, CEOBSE,
whichever is whichever is whichever whichever is
higher higher is higher higher
3.1.2 The extant sub-targets under the priority sector shall remain unchanged.4. UCBs shall prepare, with the approval of their Board, an Action Plan for compliance with
the aforesaid revised exposure limits and priority sector lending targets. They are also advised
to establish an appropriate mechanism to regularly monitor the progress made under the
Action Plan for compliance with the above instructions.
5. A copy of this circular should be placed before the Board of Directors of the UCB in its next
meeting and a confirmation thereof should be sent to the concerned Regional Office of
Department of Supervision, Reserve Bank of India.
Yours faithfully,
(Neeraj Nigam)
Chief General Manager
Enclosure : As aboveExtract of the Statement on Developmental and Regulatory Policies dated December 5,
2019
1. Primary (Urban) Co-operative Banks – Exposure Limits and Priority Sector Lending
With a view to reducing concentration risk in the exposures of primary (urban) co-operative
banks (UCBs) and to further strengthen the role of UCBs in promoting financial inclusion, it is
proposed to amend certain regulatory guidelines relating to UCBs. The guidelines would
primarily relate to exposure norms for single and group/interconnected borrowers, promotion
of financial inclusion, priority sector lending, etc. These measures are expected to strengthen
the resilience and sustainability of UCBs and protect the interest of depositors. An appropriate
timeframe will be provided for compliance with the revised norms. A draft circular proposing
the above changes for eliciting stakeholder comments will be issued shortly.