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RBI proposes to bring down single and group borrower limits of UCBs

By IndianMandarins- 31 Dec 2019
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The RBI has proposed that single and group borrower limits of UCBs should be brought down and half the loans given should not be of more than Rs 25 lakh however it is for raising limits of priority sector lending targets.

UCBs’ target for priority-sector lending has been proposed at 75 per cent of their credit from 40 per cent now. The target has to be reached in phases — 50 per cent by March 2021, 60 per cent by March 2022, and 75 per cent by March 2023.

At present, UCBs are allowed to have exposures of up to 15 per cent and 40 per cent of their capital funds to a single borrower and a group of borrowers, respectively.

Urban cooperative bankers are of the view that draft norms were similar to those prescribed for small finance banks (SFBs). These norms, if they become rules, will hamper the growth of cooperatives. The move seems to be to push UCBs to become SFBs.

The RBI said the norms would save UCBs from concentration risk and focus on their larger agenda of financial inclusion, for which they were created.

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