Current · Source: Reserve Bank of India · RBI/2013-14/307 · issued 01 Oct 2013 · ~1 min read
Quick answerRBI reiterates that UCBs must enforce share linking to borrowing at 2.5% for secured and 5% for unsecured loans, with individual shareholding capped at 5% of paid-up capital. Exemption applies only to UCBs maintaining 12% CRAR continuously.
The rule, in the simplest words
UCBs must link borrowing to shareholding at 2.5% for secured and 5% for unsecured loans.
Individual shareholding is capped at 5% of paid-up capital.
UCBs maintaining 12% CRAR are exempt from mandatory share linking norms.
How it plays out — a real example
A co-operative bank branch officer in Indore verifies that a borrower's shareholding meets the 2.5% linking norm for a secured gold loan. If the borrower's shareholding exceeds 5% of the UCB's paid-up capital, the officer ensures that the excess is adjusted or the loan is restructured to comply with the regulatory requirements.
What changed
This circular does not introduce new rules but reiterates existing norms from July 2008 and November 2010. It confirms that RBI has urged state governments to amend cooperative acts to remove monetary ceilings on individual shareholding, replacing them with the 5% capital-linked cap. Pending such amendments, UCBs must strictly follow current share linking and shareholding limits.
What it means for you
UCBs must ensure that borrowers' shareholding aligns with loan amounts—2.5% for secured and 5% for unsecured borrowing—and that no member holds more than 5% of paid-up capital. This protects member equity and prevents concentration. UCBs with sustained 12% CRAR remain exempt from mandatory share linking, offering a compliance relief for well-capitalized banks.
What you must do
Verify that all borrower shareholdings meet the 2.5% (secured) and 5% (unsecured) linking norms.
Ensure no individual member's shareholding exceeds 5% of total paid-up capital.
Maintain CRAR at 12% continuously if seeking exemption from share linking norms.
Track state-level amendments to cooperative acts and adjust policies accordingly.
Who it affects
All Urban Co-operative Banks (UCBs), UCB members/borrowers, State cooperative departments
❓ Common questions
What are the exact share linking percentages for borrowing?
For secured borrowings, the share linking requirement is 2.5% of the loan amount; for unsecured borrowings, it is 5%.
Can a UCB be exempted from these share linking norms?
Yes, if the UCB maintains a Capital to Risk Weighted Assets Ratio (CRAR) of 12% on a continuous basis, it is exempt from mandatory share linking as per earlier instructions.
What is the cap on individual shareholding in a UCB?
An individual member's shareholding is restricted to 5% of the total paid-up share capital of the UCB.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/307
UBD CO BPD (PCB) Cir. No. 25/09.18.200/2013-14
October 1, 2013
The Chief Executive Officer
All Urban Co-operative Banks
Dear Sir / Madam,
Share Linking to Borrowing Norm in Urban Co-operative Banks
Please refer to the instructions contained in para 3 of circular UBD PCB Cir. No.4/ 09.18.201/2008-09 dated July 15, 2008 on ‘Instruments for Augmenting Capital Funds – UCBs’ indicating the current regulatory prescriptions on share linking to borrowing viz. 2.5% for secured borrowings and 5% for unsecured borrowings. Further, the shareholding of an individual member is restricted to 5% of the total paid up share capital of a UCB.
2. It is advised that Reserve Bank of India had taken up with all the State Governments for carrying out necessary amendments to the respective State Co-operative Societies Acts for dispensing with, wherever applicable, monetary ceilings on individual share holding and restricting the individual shareholding of a member to 5% of the total paid up share capital of a UCB. Pending amendment being carried to the State Co-operative Societies Act, it is reiterated that all UCBs may ensure scrupulous adherence to the extant norms on share linking to borrowing and ceiling on individual share holding, as detailed in para 1 above.
3. UCBs, which maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12% on a continuous basis, will continue to be exempted, as per the instructions contained in para 2 of circular UBD BPD (PCB).Cir.No.22/09.18.201/2010-11 dated November 15, 2010 , from the extant mandatory share linking norms.
Yours faithfully,
(P.K. Arora)
General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/307 · issued 01 Oct 2013. The plain-English explanation above is BankPulse’s own independent summary.
Ensure no individual member's shareholding exceeds 5% of total paid-up capital.
📜 Compliance
Verify that all borrower shareholdings meet the 2.5% (secured) and 5% (unsecured) linking norms.
Maintain CRAR at 12% continuously if seeking exemption from share linking norms.
Track state-level amendments to cooperative acts and adjust policies accordingly.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All Urban Co-operative Banks (UCBs), UCB members/borrowers, State cooperative departments), your first concrete step on “Share Linking to Borrowing Norms for UCBs” is: “Verify that all borrower shareholdings meet the 2.5% (secured) and 5% (unsecured) linking norms.” (RBI issued this 01 Oct 2013).
Circular: RBI/2013-14/307 -- Share Linking to Borrowing Norms for UCBs
Issued: 01 Oct 2013
Action required: Verify that all borrower shareholdings meet the 2.5% (secured) and 5% (unsecured) linking norms.
Action required: Ensure no individual member's shareholding exceeds 5% of total paid-up capital.
Action required: Maintain CRAR at 12% continuously if seeking exemption from share linking norms.
Action required: Track state-level amendments to cooperative acts and adjust policies accordingly.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8485&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
Help us keep this accurate
Found an inaccuracy or have an improvement? Tell us. Every report is reviewed by our team before any change is made — nothing goes live unverified.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
BANKPULSE · FREE DAILY BRIEF
Get RBI updates for your role
Every important RBI update, decoded in plain English — for your career, exams & financial awareness.
We collect only your email, name and role, used solely to send your brief — never sold or shared. Withdraw anytime via the unsubscribe link in any email. Independent platform, not affiliated with the RBI. Information, not legal advice.
REPORT AN ERROR · BETA
Spotted an error? Earn 500 BankPulse Credits
Help us stay accurate. If your correction is verified true and approved by our founder, you earn 500 BankPulse Credits — redeemable when the platform monetises.
Reviewed by a human before any credit is awarded. We never change the site from crowd input without verification.
WANT A NEW FEATURE · BETA
What would make BankPulse more useful for you?
Tell us what to build next — a tool, a data view, a role page, anything. We read every suggestion.
Thank you — your ideas directly shape what we build.