Unsecured Exposure Norms for UCBs – RBI’s revised guidelines

Vide RBI our circular No. UBD.BPD.(PCB) Cir No.21/13.05.000/2010-11 dated November 15, 2010 on ‘Maximum Limit on Unsecured Loans and Advances’  RBI had prescribed that that the total unsecured loans and advances granted by a UCB to its members should not exceed 10 per cent of its total assets.

To boost lending to priority sector and also to speedup the financial inclusion goal, UCBs fulfilling certain conditions laid down by RBI may, with the prior approval of the Reserve Bank, grant unsecured loans (with or without surety) upto 25% of their total assets:

The following are the pre-conditions, before the UCBs can apply to RBI.

  • The entire loan portfolio of the bank should be covered under priority sector.
  • All the loans should be sanctioned as small value loans ie upto `20,000/- in a single account.
  • The UCB should have assessed CRAR of 9%.
  • The assessed gross NPAs of the UCB should be less than 10 per cent of gross advances.
  • Financial parameters for the above purposes, may be considered as on March 31 of the previous year.
  • Assessed CRAR and gross NPAs would be as assessed by the latest inspection carried out by the Reserve Bank of India.

UCBs fulfilling the above conditions and desirous of being part of the financial inclusion drive, can approach the RBI Regional Office of UBD for permission.


UCBs are broadly classified into Tier I or Tier II

Tier I UCBs were defined as UCBs with:

  • Deposit base below Rs1 billion operating in a single district.
  • Deposit base below Rs1 billion operating in more than one district provided the branches were in contiguous districts, and deposits and advances of branches in one district separately constituted at least 95 per cent of the total deposits and advances, respectively, of the bank.
  • Deposit base below `1 billion, whose branches were originally in a single district but subsequently became multi-district due to re-organisation of the district.


All other UCBs were defined as Tier II UCBs.

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