What changed
RBI observed that many UCBs had loan policies lacking comprehensive coverage and not undergoing periodic review. Now, the board must review the loan policy at least once per financial year, effective immediately from July 26, 2022.
What it means for you
UCBs must formalize a yearly board review cycle for their loan policy, ensuring it stays current with internal risk appetite and regulatory changes. This reduces the risk of outdated or non-compliant lending practices, strengthening credit governance.
What you must do
- Schedule a board meeting to review the loan policy within this financial year if not already done.
- Update the loan policy to reflect current risk appetite and all extant RBI guidelines.
- Document the annual review process and maintain records of board approvals.
- Communicate the revised policy to all credit officers and ensure implementation.
Who it affects
Primary Urban Co-operative Banks, Board of Directors of UCBs, Credit departments of UCBs
When does this annual review requirement take effect?
The instruction is effective immediately from July 26, 2022, so UCBs must comply from the current financial year onward.
What happens if a UCB fails to review its loan policy annually?
Non-compliance may lead to regulatory action, as the policy must reflect approved risk appetite and align with RBI regulations to avoid supervisory concerns.