UCB Directors Can Now Get Loans Against Own FDs and LIC Policies

What changed

Earlier, UCB directors and their relatives faced restrictions on availing loans from their bank. This circular permits them to take loans specifically against fixed deposits and life insurance policies held in their own names, as a further relaxation of prior instructions.

What it means for you

UCBs can now extend loans to directors and relatives secured by their own FDs or LIC policies without violating related-party lending norms. This gives banks a safer, collateral-backed lending option while maintaining compliance. It also reduces potential conflicts of interest since the loan is fully secured.

What banks were required to do at the time

• Update your bank's loan policy to explicitly allow loans to directors and relatives against their own FDs and LIC policies.
• Ensure proper documentation and lien marking on the fixed deposits or assignment of LIC policies before disbursing such loans.
• Train credit staff on the revised eligibility criteria and maintain separate records for these advances for audit and regulatory reporting.
• Review and align any existing board-approved policies on director-related lending with this circular.

Who it affects

Primary Urban Co-operative Banks (UCBs), Directors of UCBs and their relatives, Credit and compliance teams at UCBs