**Executive Summary**
These Amendment Directions, issued by the Reserve Bank of India (RBI), modify the "Reserve Bank of India (Urban Co-operative Banks – Concentration Risk Management) Directions, 2025". The amendments primarily concern the definition of unsecured advances and exposure norms for Urban Co-operative Banks (UCBs). The changes come into force from October 1, 2026, or earlier if adopted entirely by a UCB.
**Key Points / Main Content**
* **Definition of Unsecured Advances:**
* 'Unsecured advances' redefined as advances not covered by the realisable value of security to which the UCB has recourse.
* Clarifications provided on the treatment of clean overdrafts, loans against personal guarantees, and advances against receivables.
* **Exposure Norms:**
* The aggregate unsecured loans and advances granted by a UCB to its members shall not exceed 20% of its total loans and advances as per the audited balance-sheet as on March 31 of the preceding financial year.
* Additional unsecured advances above this ceiling are permitted for priority sector eligible loans, up to ₹50,000 per borrower.
* Paragraphs 20, 21 and 22 of the original Directions are deleted.
* The words 'ranging from ₹0.25 lakh to 5 lakh' in Paragraph 23 will be replaced by ‘specified in Paragraph 203 of the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025 (as amended from time to time)'.
* UCBs can sanction loans to nominal members only if their by-laws allow it, subject to specific monetary ceilings for consumer durables and loans against deposits.
* **Implementation:**
* Existing non-conforming loans may run off until maturity, but shall not be renewed or enhanced without compliance to the amendment directions.
* Adoption by a UCB in entirety shall entail adoption of amendments contained in these Amendment Directions as well as those contained in the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) – Amendment Directions, 2026.
* Corresponding amendment directions viz., Reserve Bank of India (Urban Cooperative Banks – Financial Statements: Presentation and Disclosures) Second Amendment Directions, 2026 have been separately issued.
* **Effective Date:** The amendments come into force on October 1, 2026, or an earlier date if adopted entirely by a UCB.
**Impact Analysis**
**Stakeholder: Urban Co-operative Banks (UCBs)**
* **Impact:** Need to revise their policies and procedures to align with the new definition of unsecured advances and revised exposure norms. Changes to what they can and cannot grant to their members.
* **Action Required:**
* Review and update lending policies and practices.
* Ensure compliance with the revised norms from October 1, 2026, or earlier if fully adopted.
**Stakeholder: Borrowers of UCBs (Members & Nominal Members)**
* **Impact:** Potentially affected by changes in the availability and terms of unsecured loans, particularly if a UCB is already close to its exposure limits.
* **Action Required:** Be aware of the new lending policies of their UCB and their implications.
**Stakeholder: Reserve Bank of India (RBI)**
* **Impact:** Monitoring and supervisory responsibility for ensuring UCBs comply with the new directions.
* **Action Required:** Monitor UCBs' compliance and take corrective actions as needed.
Key Entities Referenced
Reserve Bank of India (Urban Co-operative Banks – Concentration Risk Management) – Amendment Directions, 2026: Primary subject; these are amendment directions concerning concentration risk management for Urban Co-operative Banks (UCBs)
Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) – Amendment Directions, 2026: Referenced policy document related to credit facilities of Urban Co-operative Banks (UCBs); amended by primary subject
Banking Regulation Act, 1949: The Act which confers the powers exercised in the directions.
Reserve Bank of India: The regulator issuing the directions.
Urban Co-operative Banks: The entities to which the directions apply.
भारतीय �रज़वर् बैंक
RESERVE BANK OF INDIA
RBI/2025-26/<>
DOR.CRE.REC.<>/07-03-005/2025-26 MM DD YYYY
Reserve Bank of India (Urban Co-operative Banks – Concentration Risk
Management) – Amendment Directions, 2026 – Draft for comments
Please refer to Reserve Bank of India (Urban Co-operative Banks – Concentration
Risk Management) Directions, 2025 (hereinafter referred to as ‘the Directions’).
2. On a review, in exercise of the powers conferred by the Sections 21 and 35A read
with Section 56 of the Banking Regulation Act, 1949; and all other provisions / laws
enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this
regard, the Reserve Bank being satisfied that it is necessary and expedient in the
public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. The Amendment Directions modifies the Directions as under:
(1). In ‘Chapter I - Preliminary’ of the Directions, the following modifications shall be
effected in Paragraph 4:-
(i) Sub-paragraph (6) shall be substituted with following sub-paragraph:
‘Unsecured advances’ shall mean advances, or a portion thereof, not covered
by the realisable value of a security (primary as well as collateral) to which the
UCB has a valid recourse.
Explanation 1: The realisable value of security shall be estimated on a realistic
basis.
Explanation 2: Clean overdrafts; loans against personal guarantee; clean bills
purchased or discounted; cheques purchased; and drawals allowed against
cheques sent for collection shall be treated as unsecured advances.
Explanation 3: Advances granted to salaried employees against personal
guarantee may be treated as secured advances if the Co-operative Societies
Act of the State concerned contains an obligatory provision for deduction ofReserve Bank of India (Urban Co-operative Banks –Concentration Risk
Management) – Amendment Directions, 2026 – Draft for comments
periodical loan instalments by the employer out of the employee's salary /
wages to meet the UCB's claims, and the UCB has implemented this provision
in respect of each of such advances.
Explanation 4: Advances against inland D/A bills, including those which are not
drawn under letters of credit, having a usance of not exceeding 90 days shall
not be treated as unsecured advances.
Explanation 5: Advances against receivables, shall not be treated as unsecured
advances as long as such receivables are not overdue for more than 30 days.
(ii) In sub-paragraph (7), after the words ‘temporary period’, the words ‘subject to a
maximum period of three years’ shall be inserted.
(2). In ‘Chapter II – Exposure Norms’ of the Directions, the following modifications shall
be effected:
(i) Paragraph 19 shall be replaced with following paragraph:
The aggregate unsecured loans and advances granted by a UCB to its members
shall not exceed 20 per cent of its total loans and advances as per the audited
balance-sheet as on March 31 of the preceding financial year.
Provided that additional unsecured advances above this prudential
ceiling shall be permitted only in respect of priority sector eligible loans, subject
to a monetary ceiling of ₹50,000 per borrower.
(ii) Paragraphs 20, 21 and 22 shall be deleted.
(iii) In Paragraph 23, the words ‘ranging from ₹0.25 lakh to ₹5 lakh’ shall be replaced
with the words ‘specified in Paragraph 203 of the Reserve Bank of India (Urban Co-
operative Banks – Credit Facilities) Directions, 2025 (as amended from time to time)’.
(iv) Paragraph 25 shall be replaced with following paragraph:
A UCB may sanction loans to nominal members only if it has an enabling
provision in its by-laws (in conformity with the applicable state co-operative
2Reserve Bank of India (Urban Co-operative Banks –Concentration Risk
Management) – Amendment Directions, 2026 – Draft for comments
acts) for extending credit facility to nominal members. Subject to the above, a
UCB may grant the following loans to nominal members:
(i) loans for purchase of consumer durables subject to a monetary ceiling
of ₹2.5 lakh per borrower;
(ii) loans against fixed deposit receipts, gold and silver ornaments, life
insurance policies, and government securities, within the monetary
ceiling as per its Board approved policy.
4. The above amendments shall come into force from October 1, 2026, or an earlier
date when adopted by a UCB in entirety. It is clarified that adoption by a UCB in entirety
shall entail adoption of amendments contained in these Amendment Directions as well
as those contained in the Reserve Bank of India (Urban Co-operative Banks – Credit
Facilities) – Amendment Directions, 2026.
5. With a view to ensuring non-disruptive implementation of amendments issued vide
these Amendment Directions, a UCB is permitted to let its existing loans which are not
in conformity with these amendments as on the effective date of these Amendment
Directions to run-off till maturity. However, the UCB shall not review/renew such loans/
limits after their expiry on same or different terms, even if such renewal is provided in
the contract, or enhance the limits sanctioned prior to the date of these Amendment
Directions coming into force, unless they are in compliance with amendments issued
vide these Amendment Directions.
6. Consequent to the above amendments, corresponding amendment directions
viz., Reserve Bank of India (Urban Cooperative Banks – Financial Statements:
Presentation and Disclosures) – Second Amendment Directions, 2026 have been
separately issued.
Vaibhav Chaturvedi
(Chief General Manager)
3