What changed
RBI issued a master circular consolidating all instructions on management of advances for UCBs issued up to June 30, 2012, replacing the previous master circular of July 1, 2011. The circular updates guidelines on working capital assessment, credit administration, and prudential restructuring norms. It also includes annexures on valuation of properties, relief measures, and reporting of doubtful accounts.
What it means for you
UCBs must now follow a single, updated reference document for all advance-related guidelines, reducing ambiguity. The circular reinforces the need for board-approved credit policies and adherence to exposure norms. Banks must ensure proper assessment of working capital, especially for small borrowers, and maintain robust credit monitoring systems.
What you must do
- Review and update your bank's credit policy to align with the consolidated master circular.
- Ensure working capital assessment for borrowers (non-SSI up to ₹1 crore, SSI up to ₹5 crore) uses the turnover method with 25% of projected turnover as requirement.
- Implement regular monitoring of stock and receivable statements, with periodic physical verification.
- Adopt the prudential guidelines on restructuring of advances as per Annex 4 of the circular.
- Report borrowal accounts classified as doubtful/loss with outstanding ₹1 crore and above, and wilful defaulters, in the prescribed format.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Chief Executive Officers of UCBs, Credit departments and loan officers of UCBs, Borrowers of UCBs, especially SSI units and small enterprises
What is the working capital assessment method for small borrowers under this circular?
For non-SSI borrowers requiring fund-based working capital up to ₹1 crore and SSI units up to ₹5 crore, banks can assess working capital at 25% of projected annual turnover. The borrower contributes 5% as net working capital, and the bank provides at least 20% of turnover as finance.
Are UCBs required to report wilful defaulters?
Yes, UCBs must submit reports on borrowal accounts classified as doubtful or loss with outstanding of ₹1 crore and above, as well as wilful defaulters, in the format provided in Annex 3 of the master circular.
Does this circular change the restructuring guidelines for UCBs?
The circular consolidates existing prudential guidelines on restructuring of advances in Annex 4. UCBs must follow these guidelines for any restructuring of loans, ensuring compliance with RBI norms.