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The Reserve Bank of India (RBI) has asked urban co-operative banks (UCBs) to not lend to public sector undertakings (PSUs) as it is not consistent with the co-operative bank principles and therefore is against the purpose.
“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,” RBI said in a notification on Wednesday.
The note added that it had observed that a few UCBs have been sanctioning high-value loans to PSUs by admitting them as nominal members or otherwise.
