RBI reduces UCB exposure limit

The Reserve Bank of India (RBI) today revised the exposure limit of urban co-operative banks (UCBs) to a single borrower and a group of borrowers at 15 per cent and 40 per cent, respectively, from the current 20 per cent and 50 per cent respectively.

The banks will have to compute the revised prudential exposure limits for individual/ group of borrowers effective April 1, 2005, said the RBI in a notification.

However, in case of the existing borrowers where the outstanding or the sanctioned exposure limit exceed the revised limit, it has permitted banks to bring it down within the revised limits by March 31, 2007, it added.

Capital funds for the purpose of prudential exposure norm will be fixed in relation to bank's capital funds (both tier I and tier II capital). The exposure will henceforth include both credit exposure and investment exposure (Non SLR), which will include""- funded and non-funded credit limits, underwriting and similar commitments.

The sanctioned limit or outstanding, whichever is higher will be considered for arriving at the credit exposure limit.

In respect of non-funded credit limits 100 per cent (instead of the existing 50 per cent) of such limits or outstanding, whichever is higher, will be taken into account, said the RBI.

Exposure to individuals/group of borrowers will include investments made by the primary (urban) co-operative banks in non SLR securities prescribed by RBI.

At present, non SLR securities comprise bonds of public sector undertakings (PSUs), infrastructure bonds floated by the all India financial institutions notified by RBI from time to time, unsecured redeemable bonds floated by the nationalised banks, equity/bonds of all India financial institutions and units of UTI.