On July 25, 2024, the Reserve Bank of India issued a directive altering the ceiling on loans against shares and debentures for Urban Co-operative Banks (UCBs). Previously set at 20% of owned funds, the new regulation will link this ceiling to the Tier I capital of UCBs as of March 31 of the preceding financial year. This change, effective January 1, 2025, aligns with the guidelines outlined in the Master Circular on Prudential Norms for UCBs. The updated ceiling is aimed at enhancing financial stability by correlating the loan limits with the bank’s Tier I capital, while all other provisions from the previous circulars remain unchanged.
RESERVE BANK OF INDIA
RBI/2024-25/54
DOR.CRE.REC.29/07.10.002/2024-25
July 25, 2024
All Primary (Urban) Co-operative Banks
Madam / Dear Sir,
Bank Finance against Shares and Debentures
Please refer to the circular UBD.No.DS.PCB.CIR.16/13.05.00/2001-02 dated October 22, 2001 and para 6.6.5 of Master Circular – Exposure Norms and Statutory / Other Restrictions – UCBs dated January 16, 2024, in terms of which Primary (Urban) Cooperative Banks (UCBs) were advised that the aggregate of their all loans against the security of shares and debentures should be within the overall ceiling of 20 per cent of their owned funds.
2. On a review, it has been decided that the aforementioned overall ceiling of 20 per cent shall be linked to Tier I capital of the bank as on 31st March of the previous financial year, as defined in Master Circular – Prudential Norms on Capital Adequacy – Primary (Urban) Co-operative Banks (UCBs) dated April 1, 2024, as amended from time to time.
3. The change stipulated at paragraph 2 above shall be effective from January 01, 2025. All other related provisions of the aforesaid circulars remain unchanged.
Yours faithfully,
(Vaibhav Chaturvedi)
Chief General Manager
