What changed
RBI released a consolidated master circular on exposure norms and statutory/other restrictions for primary urban co-operative banks (UCBs), updating the previous version from July 1, 2015. The circular integrates all instructions issued up to January 16, 2024, covering exposure ceilings, unsecured advance limits, and regulatory restrictions.
What it means for you
UCBs must now follow the updated exposure norms, including revised definitions for Tier-I capital and credit exposure. The circular reinforces prudential measures to manage credit risk concentration, impacting how banks calculate limits for individual/group borrowers and unsecured advances. Banks need to align their internal policies with the consolidated guidelines to ensure compliance.
What you must do
- Review and update internal exposure limit policies to align with the new master circular.
- Recalculate Tier-I capital as per the latest prudential norms for exposure ceiling computations.
- Ensure credit exposure includes funded, non-funded, and investment exposure as defined.
- Train compliance and credit teams on updated definitions and statutory restrictions.
- Monitor adherence to ceilings on unsecured advances and regulatory restrictions on loans to directors.
Who it affects
Primary (Urban) Co-operative Banks (UCBs), Compliance officers at UCBs, Credit risk management teams at UCBs, Auditors reviewing UCB exposure norms
What is the key change in exposure computation for UCBs?
The circular clarifies that Tier-I capital as of March 31 of the preceding financial year should be used for fixing exposure limits, and credit exposure includes both funded and non-funded limits, with the higher of sanctioned limit or outstanding considered.
Does this circular affect loans against bank's own term deposits?
No, loans and advances granted against the security of the bank's own term deposits are excluded from credit exposure calculations.
What should UCBs do about unsecured advances?
UCBs must adhere to the specified ceilings on unsecured advances, including aggregate limits and credit card limits, as detailed in the circular.