RBI draft circular also includes revision in priority sector lending targets for UCBs
The Reserve Bank of India has released draft circular on limits on exposure to single and group borrowers/parties, large exposures and revision in priority sector lending targets for primary (urban) co-operative banks (UCBs) for feedback/ suggestions.The circular stipulates that the prudential exposure limits for UCBs for a single borrower/party and a group of connected borrowers/parties shall be 10% and 25%, respectively, of their Tier I capital and that at least 50% of their loan portfolio shall comprise loans not more than Rs 25 lakh per borrower/party.
It further stipulates that the target for loans and advances to priority sector for UCBs shall stand increased to 75% of adjusted net bank credit or credit equivalent amount of off-balance sheet exposure, whichever is higher, by March 2023. An appropriate glide path is proposed to be provided to UCBs for compliance with the aforesaid norms/limits/targets.
The above measures are expected to reduce credit concentration risk of the UCBs and promote financial inclusion.
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