What changed
The RBI released a revised Master Circular on Management of Advances for Primary (Urban) Co-operative Banks, updating the previous version from July 25, 2023. It consolidates all instructions issued up to March 31, 2025, without introducing any new guidelines or changes.
What it means for you
UCBs must ensure their loan policies align with the updated consolidated instructions, including working capital assessment norms and prudential guidelines. The circular reinforces existing requirements like board review of loan policies annually and adherence to turnover-based working capital limits for small borrowers.
What you must do
- Review and update your bank's loan policy to align with the revised Master Circular, ensuring board approval and annual review.
- Train credit staff on the consolidated instructions, especially working capital assessment for micro/small enterprises and other borrowers.
- Verify that reporting and credit information exchange processes comply with the updated circular.
- Ensure prudential guidelines on restructuring and relief measures for natural calamities are correctly implemented.
Who it affects
Primary (Urban) Co-operative Banks, Board of Directors of UCBs, Credit and risk management teams at UCBs, Borrowers seeking working capital or other advances from UCBs
Does this Master Circular introduce any new lending rules for UCBs?
No, it only consolidates existing instructions issued up to March 31, 2025, without adding new guidelines.
What is the working capital assessment method for micro and small enterprises under this circular?
For MSEs requiring fund-based working capital up to ₹5 crore, assessment can be based on projected annual turnover, with the bank providing at least 20% of turnover as finance.
How often must a UCB's loan policy be reviewed as per this circular?
The loan policy must be reviewed by the board at least once in a financial year to ensure alignment with regulations and risk appetite.