What changed
This master circular updates and consolidates all prior instructions on exposure norms and statutory/other restrictions for UCBs issued up to June 30, 2013. It replaces the previous master circular dated July 2, 2012. The document does not introduce new limits but reaffirms existing prudential ceilings and compliance requirements.
What it means for you
UCBs must continue to adhere to the 15% individual and 40% group exposure limits relative to capital funds. The circular emphasizes annual board-approved ceiling setting, with half-yearly recalibration permitted only for share capital changes, not other capital accretions. Banks cannot exceed ceilings in anticipation of future capital infusion.
What you must do
- Review and update exposure ceilings annually with board approval after balance sheet finalization.
- Ensure individual borrower exposure does not exceed 15% and group borrower exposure does not exceed 40% of capital funds.
- Adjust exposure limits at half-yearly intervals only for share capital changes, with board approval.
- Avoid taking exposures above prescribed ceilings in anticipation of future capital infusion.
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, comprising both credit and non-SLR investment exposure.
Can UCBs adjust exposure limits more than once a year?
Yes, banks may fix a fresh exposure limit at half-yearly intervals (e.g., as of September 30) to account for share capital changes, but only with board approval. Other capital fund accretions like half-yearly profits are not eligible.
Does this circular apply to all types of advances?
Yes, it covers exposure norms for individual/group borrowers, unsecured advances, and various statutory/regulatory restrictions including advances against shares, to directors, and to nominal members.