Home › Circulars › RBI/2013-14/615

UCBs told to avoid large loans to PSUs

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2013-14/615 · issued 28 May 2014 · ~2 min read
Quick answerRBI directs Urban Cooperative Banks to generally not grant large-value loans to Public Sector Undertakings, as such lending dilutes their cooperative character and core mandate of serving small borrowers, agriculture, and small businesses.

What changed

RBI observed that some UCBs were sanctioning high-value loans to PSUs by admitting them as nominal members or otherwise. The circular reiterates that UCBs are meant to meet credit needs of low/middle income groups, small borrowers, agriculture, and small businesses. It advises UCBs, as a matter of principle, to generally not grant large-value loans to PSUs or government undertakings.

What it means for you

UCBs must realign their lending focus away from large-ticket PSU exposures and back to their core cooperative mandate. This will likely reduce concentration risk from PSU lending and reinforce the sector's role in financial inclusion. Banks should review existing PSU loan portfolios and ensure new sanctions comply with this principle.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Who it affects

Primary (Urban) Cooperative Banks, UCB management and credit committees, PSUs seeking loans from UCBs

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Does this circular ban all loans to PSUs by UCBs?

No, it advises UCBs to generally not grant large-value loans to PSUs. Small-value loans may still be permissible, but the principle is to avoid large exposures that dilute the cooperative character.

What is the rationale behind this restriction?

UCBs are primarily meant to serve low/middle income groups, small borrowers, agriculture, and small businesses. High-value PSU lending is inconsistent with cooperative principles and undermines their core mandate.

Does this apply to all government undertakings or only central PSUs?

The circular refers to 'Public Sector/Government Undertakings' broadly, covering both central and state-level entities. UCBs should apply the principle to all such undertakings.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #923: UBD.CO.BPD.(PCB).Cir.No.66/13.05.000/2013-14 — "Lending to Public Sector Undertakings" dated May 28, 2014”
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/615 UBD.CO.BPD.(PCB) Cir No. 66/13.05.000/2013-14 May 28, 2014 The Chief Executive Officers All Primary (Urban) Co-operative Banks Madam / Dear Sir, Lending to Public Sector Undertakings It has been observed that a few Urban Cooperative Banks (UCBs) have been sanctioning high value loans to Public Sector Undertakings (PSUs) by admitting them as nominal members or otherwise. 2. As you are aware, UCBs are meant primarily to meet the credit needs of the society by providing loans and advances to low/middle income groups (small borrowers), agriculture and small businesses for furthering the cause of cooperation. Grant of high value loans to PSUs is not consistent with the co-operative principles and dilutes the cooperative character of UCBs. 3. In view of the above, UCBs are advised, as a matter of principle, generally not to grant large value loans to Public Sector/Government Undertakings. Yours faithfully, (P K Arora) General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/615 · issued 28 May 2014. The plain-English explanation above is BankPulse’s own independent summary.
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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=8908&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.
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