Maximum Limit on advances-Limits on credit exposure for UCBs
- RBI Guidelines
1. At present for Primary (Urban) Co-operative banks (UCBs), the prudential exposure ceiling should not exceed 20 percent and 50 percent of the capital funds of the bank in case of individual borrower and group of borrowers respectively. The capital funds comprise of paid up capital and free reserves. Exposure includes both funded and non funded credit limits and underwriting and similar commitments. The sanctioned limits or outstanding whichever is higher is reckoned for arriving at exposure limit. However in respect of non-funded credit limits, only 50 % of such limits or outstanding, whichever is higher is taken for arriving at the exposure ceiling.
2. Reserve Bank has reviewed the matter and decided on 15th April 2005 as under :
To fix the prudential exposure limits at 15 percent and 40 percent of the 'Capital Funds' in case of single borrower and group of borrowers respectively.
'Capital Funds' for the purpose of prudential exposure norm may be fixed in relation to bank's capital funds (both Tier I and Tier II Capital)
The exposure shall henceforth include both credit exposure and investment exposure (Non SLR) as indicated below:
Funded and non funded credit limits and underwriting and similar commitments. The sanctioned limit or outstanding whichever is higher shall be reckoned for arriving at credit exposure limit.
In respect of non funded credit limits 100 percent (instead of the existing 50 percent) of such limits or outstanding, whichever is higher, shall be taken into account for this purpose.
3. The banks are advised to compute the revised prudential exposure limits for individual/ group of borrowers w.e.f April 1, 2005.However, in case of the existing borrowers where the outstanding or the sanctioned exposure limit exceed the revised limit, the same be brought down within the revised limits in a maximum period of 2 years, i.e. by March 31, 2007.