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UCBs told not to offer big ticket loans to PSUs

The Reserve Bank of India has advised urban cooperative banks against giving big ticket loans to public sector companies. The central bank says such loans are not in conformity with the cooperative principles and dilutes the cooperative character of UCBs. Instead, UCBs should focus on providing small value loans to middle and lower income groups, farmers and small businessmen, RBI said in a notification. UCBs are advised generally not to grant large value loans to public sector or government undertakings, it told CEOs of UCB. The notification says a few UCBs have been found to be sanctioning high value loans to PSUs by admitting them as nominal members or otherwise. UCBs are meant ‘primarily to meet the credit needs of the society by providing loans and advances to low/middle income groups (small borrowers), agriculture and small businesses for furthering the cause of cooperation, RBI said, adding grant of high value loans to PSUs is not consistent with the cooperative principles.

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