UCB Advances Master Circular: Key Updates for Urban Co-op Banks

What changed

RBI issued a new Master Circular on Management of Advances for UCBs, superseding the April 8, 2022 version. It consolidates all existing instructions on credit dispensation, working capital, and prudential norms into one document. The circular mandates board review of loan policies at least once a financial year.

What it means for you

UCBs must align their credit policies with this consolidated circular, ensuring board-approved risk appetite and regulatory compliance. The working capital assessment for turnover-based limits requires assessment at 25% of projected turnover, with borrower contributing 5% as Net Working Capital and bank providing minimum 20% finance. Banks need to update internal manuals and training to reflect the consolidated guidelines.

What banks were required to do at the time

• Review and update your bank's loan policy with board approval at least once a financial year.
• Ensure working capital assessment for turnover-based limits follows the 25% assessment with 20% minimum bank finance and 5% borrower contribution.
• Train credit staff on the consolidated circular, especially sections on restructuring and credit information reporting.
• Verify that all existing advance-related processes comply with the updated master circular.

Who it affects

Primary Urban Co-operative Banks, Board of Directors of UCBs, Credit and risk management teams in UCBs, Borrowers availing working capital limits from UCBs