What changed
RBI enhanced individual unsecured loan limits for UCBs with CRAR >=9%, varying by DTL slab: up to Rs.1 lakh (DTL <=Rs.10 crore), Rs.2 lakh (Rs.10-50 crore), Rs.3 lakh (Rs.50-100 crore), Rs.5 lakh (>Rs.100 crore). For UCBs with CRAR <9%, limits are lower: Rs.0.25 lakh to Rs.2 lakh. Aggregate unsecured loans remain capped at 10% of total assets.
What it means for you
Compliant UCBs can now extend higher unsecured credit to members, supporting business growth. Non-compliant UCBs face stricter caps, incentivizing CRAR improvement. Banks must monitor aggregate exposure against the 10% asset ceiling and adjust portfolios within six months if exceeded.
What you must do
- Review your UCB's CRAR status and DTL slab to determine applicable individual unsecured loan limits.
- Ensure aggregate unsecured loans do not exceed 10% of total assets (net of losses, intangible assets, contra items).
- If current unsecured advances exceed the revised limits, initiate corrective steps to align within six months from November 15, 2010.
- Update internal lending policies and credit approval systems to reflect the new per-borrower caps.
Who it affects
All Urban Co-operative Banks (UCBs), UCB borrowers seeking unsecured loans, RBI supervisory teams monitoring UCB compliance
What is the aggregate limit for unsecured loans for a UCB?
The total unsecured loans and advances (with or without surety or for cheque purchase) must not exceed 10% of the UCB's total assets as per the audited balance sheet of the preceding financial year, net of losses, intangible assets, and contra items.
What happens if a UCB's unsecured advances exceed the new limits?
UCBs with unsecured advances above the revised limits are allowed a period of six months from the circular date (November 15, 2010) to conform to the new limits.