RBI Revises Lending Guidelines for UCBs Against Shares and Debentures

The Reserve Bank of India (RBI) has revised the regulation governing Primary (Urban) Cooperative Banks (UCBs) concerning their financing against shares and debentures. Under the existing guidelines, UCBs are required to ensure that the total value of all loans granted against the security of shares and debentures did not exceed 20 percent of their owned funds. However, following a comprehensive review, the RBI has decided to modify this overall ceiling.

The 20 percent ceiling will be linked to the Tier I capital (defined in Master Circular dated April 1, 2024) of the bank as of March 31 of the previous financial year.

This revision seeks to better align lending limits with the banks’ fundamental capital strength, providing a sturdier framework for evaluating and managing risk. By linking the loan ceiling to Tier I capital, the RBI intends to enhance financial stability and improve risk management practices within Primary (Urban) Co-operative Banks.

The new guideline, effective January 1, 2025, underscores the RBI’s ongoing efforts to strengthen the financial health of UCBs and safeguard the interests of their stakeholders.