No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2005-06/175 · issued 06 Oct 2005 · ~2 min read
Quick answerRBI has partially relaxed its blanket ban on loans to directors of Urban Co-operative Banks. Three specific categories—staff directors, salary earners' bank directors, and managing directors of multi-state UCBs—are now exempt, allowing normal employee or member loans.
What changed
Earlier circulars (April and June 2003) had prohibited all loans and advances to directors, their relatives, and entities they are interested in. Now, RBI has carved out three exemptions: regular employee loans to staff directors, normal member loans to directors of salary earners' co-operative banks, and normal employee loans to managing directors of multi-state co-operative banks.
What it means for you
UCBs can now process certain director-related loans without violating the earlier blanket ban, but only for the specified categories. Lenders must update their internal policies to clearly distinguish exempted loans from prohibited ones and ensure compliance documentation. This relaxation does not extend to other director-related lending—tight controls remain.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Update board-approved loan policy to list the three exempted categories with clear eligibility criteria.
Train credit and compliance teams to identify and document exempted director loans separately.
Ensure all non-exempt director-related loans continue to be strictly prohibited and flagged in audits.
Acknowledge receipt of this circular to your respective RBI Regional Office as instructed.
Who it affects
All Primary (Urban) Co-operative Banks, Staff directors on UCB boards, Directors of salary earners' co-operative banks, Managing directors of multi-state co-operative banks
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn05 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Does this circular allow loans to all directors of UCBs?
No. Only three specific categories are exempt: staff directors (for employee loans), directors of salary earners' banks (for normal member loans), and managing directors of multi-state UCBs (for employee loans). All other director-related loans remain banned.
What about loans to relatives or firms of directors?
The earlier blanket prohibition on loans to relatives and firms/concerns/companies in which directors are interested continues unchanged. This circular only exempts the three categories listed.
Do we need to report these exempted loans separately?
The circular does not prescribe a specific reporting format, but banks should maintain clear internal records to demonstrate compliance. Acknowledge receipt to the Regional Office as directed.
📜 This document’s life story (2 recorded events, each backed by RBI’s own words)
RBI’s words: “the subsequent relaxations advised vide circular no. UBD.PCB.Cir.No.14 /13.05.000/05-06 dated October 6, 2005”
Repealed byRBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #2750: UBD.PCB.CIR.No.14/13.05.000/05-06 — "Loans and Advances to Directors, Relatives and Firms / Concerns in which they are Interested - UCBs" dated October 6, 200”
📜 Read the original circular — full text as issued by RBI
RBI/2005-06/175
UBD.PCB.CIR.No.14/13.05.000/05-06
October 6, 2005
The Chief Executive Officers of All Primary (Urban) Co-operative Banks
Dear Sir / Madam,
Loans and advances to directors, relatives and firms/concerns in which they are interested-UCBs
Please refer to our circulars UBD.PCB.CIR.50/13.05.00/2002-03 and UBD.BPD.Cir.No. 54/13.05.00/02-03 dated April 29, 2003 and June 24, 2003 respectively, prohibiting UCBs from extending any loans and advances (both secured and unsecured) to the directors, their relatives and the firms/concerns/companies in which they are interested.
2. On reconsideration it has been decided to exclude the following categories of director related loans from the purview of the instructions issued vide our circular under reference:
i. regular employee-related loans to staff directors on the Board of UCBs;
ii. normal loans as applicable to members to the directors on the Boards of salary earners’ co-operative banks and
iii. normal employee-related loans to Managing Directors of Multi-State co-operative banks.
3. Please acknowledge receipt of this circular to the concerned Regional Office.
Yours faithfully,
sd/-
(A.K.Khound)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/175 · issued 06 Oct 2005. The plain-English explanation above is BankPulse’s own independent summary.
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2525&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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