What changed
Previously, UCBs could only exceed the 10% unsecured exposure cap with prior RBI approval for loans up to ₹20,000. Now, loans up to ₹10,000 are automatically exempt from the 10% ceiling, subject to conditions like CRAR of 9% and NPAs under 10%. The aggregate of such exempted loans is capped at 15% of total assets.
What it means for you
This gives compliant UCBs more headroom to offer small unsecured loans without seeking RBI approval each time, boosting credit access for low-ticket productive purposes. Banks must monitor end-use and ensure they meet the financial parameters as of the previous March 31. Non-compliant UCBs remain bound by the older, stricter limits.
What you must do
- Verify your bank's CRAR is at least 9% and gross NPAs are below 10% as per last audited balance sheet.
- Ensure each unsecured loan under this exemption does not exceed ₹10,000 and is for a productive purpose.
- Track total unsecured loans under this exemption to keep them within 15% of total assets.
- Maintain documentation to demonstrate end-use of funds for each such loan.
- If your bank does not meet the criteria, continue following the existing 10% ceiling and individual/group limits from the November 2010 circular.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), UCBs meeting CRAR and NPA thresholds, UCBs not meeting the criteria (remain under old norms)
What is the maximum unsecured loan amount per account under this exemption?
The exemption applies only to loans where the individual amount sanctioned does not exceed ₹10,000.
What happens if my UCB does not meet the 9% CRAR or NPAs below 10%?
Such UCBs must continue to follow the earlier guidelines, which cap unsecured loans at 10% of total assets with individual and group borrower limits ranging from ₹25,000 to ₹5 lakh based on DTL and CRAR.
Is prior RBI approval still needed for unsecured loans above ₹10,000?
Yes, for loans above ₹10,000, the earlier circular requiring prior RBI approval for up to ₹20,000 per account (up to 25% of total assets) remains applicable, subject to conditions.