What changed
This master circular consolidates and updates all prior instructions on exposure norms and statutory/other restrictions for UCBs issued up to June 30, 2010. It replaces the previous master circular dated July 1, 2009. No new policy changes were introduced; the circular merely compiles existing directives into a single reference document.
What it means for you
UCBs must ensure their exposure to individual borrowers does not exceed 15% of capital funds and to group borrowers 40% of capital funds, with ceilings reviewed annually after balance sheet finalisation. The exposure definition now explicitly includes both credit exposure (loans and advances) and non-SLR investment exposure. Banks cannot exceed these limits in anticipation of future capital infusion, and half-yearly adjustments are allowed only for share capital changes, not profits.
What you must do
- Review and update your bank's board-approved exposure ceilings for individual and group borrowers based on latest audited capital funds.
- Ensure exposure calculations include both credit exposure (loans and advances) and non-SLR investment exposure as per para 2.2.2(B).
- Conduct half-yearly exposure limit reviews (as on September 30) only for share capital changes, not for interim profits.
- Verify that no exposures are taken in excess of ceilings in anticipation of future capital infusion.
- Maintain compliance with all statutory and regulatory restrictions listed, including limits on unsecured advances and advances to directors.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Board of Directors of UCBs, Loan sanctioning authorities and investment departments of UCBs
What is the exposure ceiling for an individual borrower under this circular?
The exposure to an individual borrower must not exceed 15% of the bank's capital funds, as defined in the Master Circular on Capital Adequacy.
Can we adjust exposure limits based on half-yearly profits?
No, only accretion to share capital (e.g., as on September 30) can be considered for half-yearly limit revisions with board approval. Half-yearly profits are not eligible.
Does this circular introduce any new restrictions?
No, it consolidates all existing instructions on exposure norms and statutory/other restrictions issued up to June 30, 2010, without introducing new policy changes.