UCBs get more to expand business

Mumbai: In a bid to facilitate the growth of well-managed and financially-sound urban cooperative banks (UCBs), the RBI has decided to withdraw the existing restrictions on granting multi-state status and extension of area of operation beyond the state of registration for such UCBs having a minimum net worth of Rs 50 crore. The central bank has also allowed such UCBs, which have acquired weak banks in other state(s), to extend the area of operation to the entire state of registration of the target bank provided they have minimum net worth of Rs 50 crore;

Further, the Tier-II UCBs

registered or deemed to be registered under the Multi-State Co-operative Societies Act, 2002 are allowed to extend area of operation to the entire state of original registration. Detailed guidelines on this will be issued separately, said RBI .

RBI has also decided to allow well-managed and financially-sound UCBs to open branches and extension counters within their existing/approved area of operation, beyond the current ceiling of 10% as long as they have sufficient headroom capital for each branch. With a view to expanding the outreach of the UCBs, RBI has also allowed well-managed and financially-sound UCBs to engage business correspondents (BCs)/ business facilitators (BFs) using information and communication technology (ICT) solutions.

Keeping in view the growth in business of the UCBs over the years, RBI has decided to enhance the existing limits on individual unsecured loans and advances extended by the UCBs, which are complying with the regulatory capital to risk-weighted assets ratio (CRAR) of 9% subject to the overall ceiling of 10% of total assets.

At present, UCBs can provide housing, real estate and commercial real estate loans up to 15% of their deposit resources as on March 31 of the previous year. It has now been decided to link housing, real estate and commercial real estate loans of UCBs to their total assets instead of deposits.

Accordingly, RBI has decided to replace the existing limit of 15% of deposits real estate and commercial real estate loans by a limit of 10% of total assets and an additional limit of 5% of total assets will be available for housing loans granted to individuals by the UCBs for purchase/construction of dwelling units up to Rs 10 lakh. It is mandatory for borrowers of UCBs to subscribe to the shares of the bank to the extent of 2.5-5.0 % of their borrowings.

courtesy : the financial express