What changed
RBI reviewed earlier guidelines (Sept 2007, May 2003) and set a prudential inter-bank gross exposure limit of 20% of total deposit liabilities as of previous March 31. Within this, deposits with any single bank are capped at 5%. Exemptions apply for non-scheduled Tier I UCBs' SLR deposits with PSBs/IDBI and deposits with Central/State Cooperative Banks. Non-scheduled UCBs placing deposits with scheduled UCBs remain subject to a 5% single-bank limit, and scheduled UCBs' total inter-UCB deposits accepted cannot exceed 10% of their deposit liabilities.
What it means for you
UCBs must tighten monitoring of inter-bank exposures to stay within the new 20% gross and 5% single-bank caps. Exemptions for certain SLR deposits provide relief but require careful tracking. Banks need board-approved policies covering funds position, liquidity, cost, returns, and counterparty risk, with half-yearly reviews. Non-compliance could lead to regulatory action.
What you must do
- Calculate your total deposit liabilities as of March 31 previous year and ensure gross inter-bank deposits (including call money, CDs, clearing balances) do not exceed 20%.
- Verify that deposits with any single bank are within 5% of your total deposit liabilities.
- Identify and segregate exempt deposits (non-scheduled Tier I SLR deposits with PSBs/IDBI, and deposits with Central/State Coop Banks) from the prudential limit calculation.
- Draft or update a board-approved policy for inter-bank deposit placement covering liquidity, cost, returns, and counterparty risk, and review it at least half-yearly.
- For non-scheduled UCBs: ensure deposits with any scheduled UCB do not exceed 5% of your deposit liabilities; for scheduled UCBs: cap total inter-UCB deposits accepted at 10% of your deposit liabilities.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Non-scheduled Tier I UCBs, Scheduled UCBs accepting inter-UCB deposits, Commercial banks and IDBI Bank Ltd (as deposit recipients)
What is the new gross inter-bank exposure limit for UCBs?
The total deposits placed by a UCB with other banks (including call money, notice money, CDs, and balances for clearing/CSGL/currency chest/remittance) cannot exceed 20% of its total deposit liabilities as of March 31 of the previous year.
Are there any exemptions from these prudential limits?
Yes. Non-scheduled Tier I UCBs' SLR deposits held with Public Sector Banks and IDBI Bank Ltd (up to 15% of NDTL) are exempt. Also, deposits with the Central Cooperative Bank or State Cooperative Bank of the concerned state, treated as SLR under Section 24 of the Banking Regulation Act, are exempt.
What are the limits for inter-UCB deposits between non-scheduled and scheduled UCBs?
A non-scheduled UCB cannot place deposits with any single scheduled UCB exceeding 5% of its total deposit liabilities. A scheduled UCB cannot accept total inter-UCB deposits exceeding 10% of its total deposit liabilities as of March 31 of the previous year.