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Maximum limit on Advances – Advances to Directors
and their relatives and to concerns in which Directors
or their relatives are interested

December 4, 2002

Ref.No.UBD.DS.Cir. 27 /13.05.00/2002-03

The Chief Executive Officers of
All Primary (Urban) Co-operative Banks

Dear Sir/Madam,

Maximum limit on Advances – Advances
to Directors and their relatives and to concerns
in which Directors or their relatives are interested

Please refer to our Circular DS.PCB.Cir.76/13.05.00/ 1993-94 dated 26 May 1994 on the captioned subject. As per the instructions contained therein, a primary (urban) co-operative bank may not grant or renew secured loans or advances or other financial accommodation to all its directors and to the concerns in which its directors are interested (including such unsecured loans and advances, etc. to them to the extent permitted under Section 20 read with Section 56 of the Banking Regulation Act, 1949) and unsecured or secured loans or advances or any financial accommodation to the relatives of the directors and the concerns in which such relatives are interested, all put together, for a sum exceeding 10% of its total of time and demand liabilities(DTL).

2. The matter has been reviewed and it has been decided that the above overall ceiling for loans and advances to directors, their relatives and concerns in which they are interested should be brought down to 5 per cent of the DTL from the earlier ceiling of 10% of the DTL with immediate effect. Those banks whose outstandings of such loans on 30 September 2002 or thereafter, were more than 5% of their DTL are advised not to sanction any fresh loans/renew the existing facilities to their directors, their relatives and concerns in which they are interested so as to reduce the outstandings of such loans and bring these within the prescribed limit of 5% at the earliest but not later than 31 March 2003. Urban cooperative banks are therefore required to initiate immediate steps to bring down the excess dues within the prescribed limit as early as possible but not later than 31 March 2003. The other instructions contained in the above directive remain unchanged.

3. Accordingly, an amended directive UBD.No.DS.DIR. 3 /13.05.00/2002-03 dated 4th December 2002 is enclosed.

4. Please acknowledge receipt of the circular to the concerned Regional Office.

Yours faithfully,

(K.V. Rajan)
Chief General Manager

Encl: As above

Maximum limit on advances

December 4, 2002

Ref.No.UBD NO. DS.DIR. 3 /13.05.00/2002-2003

Maximum limit on advances

In exercise of the powers conferred under Section 21 and Clause (b) of the Proviso to clause (b) of Sub-Section (1) of Section 20 and Section 35A read with Section 56 of the Banking Regulation Act, 1949, and in partial modification of its Directive UBD(PCB) DIR 5/ 13.05.00.93-94 dated 26 May, 1994 as amended from time to time, the Reserve Bank of India , being satisfied that it is necessary and expedient in the public interest so to do, hereby directs that:

The Clause (iii) of paragraph 1 of the aforesaid directive since renumbered as Clause (ii) vide our directive No.UBD.DS.PCB.DIR.18/13.05.00/95-96 dated 16 January, 1996 shall be substituted by the following:

"Advances to all Directors and their relatives put together

(iii) No primary co-operative bank shall make or provide or renew secured loans or advances or other financial accommodation to all its directors and to the concerns in which its directors are interested (including such unsecured loans and advances, etc. to them to the extent permitted under Section 20 read with Section 56 of the Banking Regulation Act 1949) and unsecured or secured loans or advances or any financial accommodation to the relatives of the directors and the concern in which such relatives are interested, put together, for a sum exceeding 5% of its total of time and demand liabilities.

Provided that the aggregate of amount outstanding in respect of such unsecured advances to:

  1. the directors and the concerns in which directors are interested; and

  2. to the relatives of the directors and to concerns in which the relatives are interested; shall not at any time, taken together, exceed:

    1. Rs. 50,000/- or 5% of the total of the time and demand liabilities, whichever is lower, in cases where the total of the time and demand liabilities does not exceed Rs. 1.00 crore.

    2. Rs. 1.00 lakh, in cases where the total time and demand liabilities exceed Rs. 1.00 crore but less than Rs.10.00 crore.

    3. Rs. 2.00 lakh in cases where the total time and demand liabilities exceed Rs.10.00 crore."

2. The other provisions of the directive UBD No. (PCB) DIR.5/13.05.00/93-94 dated 26 May 1994 shall remain unchanged.

(P.B.Mathur)
Executive Director

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