Avoid big loans to PSUs, RBI tells urban co-op banks

Urban cooperative banks (UCBs) have been asked not to give high-value loans to government companies and stick to their core mandate of lending to small borrowers and for agriculture.

“UCBs are meant primarily to meet the credit needs of the society by providing loans and advances to low- and middle-income groups (small borrowers), agriculture and small businesses for furthering the cause of cooperation,” RBI said in a notification.

Dilutes character The central bank added, “The grant of high value loans to public sector undertakings (PSUs) is not consistent with the co-operative principles and dilutes the cooperative character of UCBs.”

The RBI observed that a few UCBs have been sanctioning high-value loans to PSUs by admitting them as nominal members or otherwise.

“UCBs are advised, as a matter of principle, generally not to grant large value loans to public sector/government undertakings,” RBI said.

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