Tag Archives: lending

co-origination model

RBI press release dated 8th October, 2020 giving their statement on developmental and regulatory policies.

Review of the Co-origination Model
The Reserve Bank had, in 2018, put in place a framework for co-origination of loans by banks and a category of Non Banking Financial Companies (NBFCs) for lending to the priority sector subject to certain conditions. The arrangement entailed joint contribution of credit at the facility level, by both the lenders as also sharing of risks and rewards between them for ensuring appropriate alignment of respective business objectives. Based on the feedback received from the stakeholders, to better leverage the respective comparative advantages of the banks and NBFCs in a
collaborative effort, and to improve the flow of credit to the unserved and
underserved sector of the economy, it has been decided to extend the scheme to all the NBFCs (including HFCs), to make all priority sector loans eligible for the scheme and give greater operational flexibility to the lending institutions, while requiring them to conform to the regulatory guidelines on outsourcing, KYC, etc. The proposed framework will be called as “Co-Lending Model”. The revised guidelines will be issued by end of October 2020.

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exposure limits – loans

RBI circular dated 13th march, 2020 to urban co-operative banks on credit exposure limits to borrowers.


Limits on exposure to single and group borrowers/parties and large exposures and Revision in the target for priority sector lending – UCBs

Please refer to paragraph 1 of the Statement on Developmental and Regulatory Policies dated December 5, 2019 (extract enclosed) and the subsequent draft circular on the subject issued on the RBI website, vide Press Release 2019-2020/1541 dated December 30, 2019, for eliciting comments from the stakeholders. After examining the comments received in this regard, the final guidelines on the subject are given below.

2. Prudential Exposure Limits

2.1 In terms of our circular UBD.DS. Cir.No.44/13.05.00/2004-05 dated April 15, 2005, Primary (Urban) Co-operative Banks (UCBs) were permitted to have exposures up to 15 per cent and 40 per cent of their capital funds to a single borrower and a group of borrowers, respectively. On a review, it has been decided that, henceforth, the prudential exposure limits for UCBs for a single borrower/party and a group of connected borrowers/parties shall be 15 per cent and 25 per cent, respectively, of their tier-I capital.

2.1.1 The revised exposure limits shall apply to all types of fresh exposures taken by UCBs. UCBs shall bring down their existing exposures which are in excess of the revised limits to within the aforesaid revised limits by March 31, 2023. However, where the existing exposure comprises only term loans and non-fund-based facilities, while no further exposure shall be taken on such borrowers, these facilities may be allowed to continue as per their respective repayment schedule / till maturity.

2.1.2 Tier-I capital as on March 31 of the preceding financial year shall be reckoned for the purpose of fixing the exposure limits. Tier-I capital for the purpose will be the same as that prescribed for computation of capital adequacy of UCBs (vide Master Circular dated July 1, 2015 on Prudential Norms on Capital Adequacy), as amended from time to time.

2.1.3 Whether borrowers/parties belong to a ‘group of connected borrowers/parties’ shall be determined based on the instructions contained at para 2.2.3 and 2.2.4 of the Master Circular DCBR.CO.BPD. (PCB) MC No.13/13.05.000/2015-16 dated July 1, 2015, as amended from time to time.

2.1.4 All other extant instructions on the subject, including the definition of exposure, will remain unchanged.

2.2 UCBs shall have at least 50 per cent of their aggregate loans and advances comprising loans of not more than ₹25 lakh or 0.2% of their tier I capital, whichever is higher, subject to a maximum of Rs.1 crore, per borrower/party. Tier I capital for this purpose shall be reckoned in the manner provided in paragraph 2.1.2 above. Notwithstanding the above, UCBs shall adhere to the revised exposure limits stipulated at para 2.1 above. UCBs which do not, at present, comply with the prescribed threshold shall be in conformity with the above requirements by March 31, 2024.

2.2.1 It is clarified that ‘loans’ for the purpose shall include all types of funded and non-funded exposures in the nature of credit.

3. Revised Priority Sector Lending Target

3.1 In terms of the circular DCBR.BPD (PCB).Cir.No.07/09.09.002/2017-18 dated May 10, 2018, the overall priority sector lending (PSL) target for UCBs stood at 40% of the adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposure (CEOBSE), whichever is higher. On a review, it has been decided that the overall PSL target for UCBs shall stand increased to 75 per cent of ANBC or CEOBSE, whichever is higher.

3.1.1 UCBs shall comply with the above target by March 31, 2024 as per the following milestones:

PSL targets to be achieved by
March 31, 2021 March 31, 2022 March 31, 2023 March 31, 2024
45% of ANBC or CEOBSE, whichever is higher 50% of ANBC or CEOBSE, whichever is higher 60% of ANBC or CEOBSE, whichever is higher 75% of ANBC or CEOBSE, whichever is higher

3.1.2 The extant sub-targets under the priority sector shall remain unchanged.

4. UCBs shall prepare, with the approval of their Board, an Action Plan for compliance with the aforesaid revised exposure limits and priority sector lending targets. They are also advised to establish an appropriate mechanism to regularly monitor the progress made under the Action Plan for compliance with the above instructions.

5. A copy of this circular should be placed before the Board of Directors of the UCB in its next meeting and a confirmation thereof should be sent to the concerned Regional Office of Department of Supervision, Reserve Bank of India.

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