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Breather for coop banks

Mumbai/Calcutta, April 29: The Reserve Bank of India today announced certain relaxations for urban co-operative banks (UCBs) on gold loans, placement of deposits with other scheduled UCBs and limits on unsecured advances.

RBI, in its monetary and credit policy for 2003-04, said the relaxations have been made in pursuance to recommendations made by the Anant Geete committee and in consultation with the government.

The central bank has proposed to exempt both gold and small loans up to Rs 1 lakh from 90-day norm for recognition of loan impairment. However, these loans would continue to be governed by the 180-day norm for classification as NPAs.

In view of the difficulties expressed by UCBs in managing their short-term surplus funds while adhering to this prescription, RBI has proposed to permit UCBs to place deposits with strong scheduled UCBs (other than those classified as weak or sick) with certain conditions.

Detailed guidelines in this regard would be issued separately, it added.

RBI has also doubled the ceiling on unsecured advances by UCBs in order to provide greater flexibility. The ceiling would be Rs 50,000 for non-scheduled UCBs with demand and time liability (DTL) of less than Rs 10 crore and Rs 1 lakk for UCBs with DTL of Rs 10 crore and above.

In case of scheduled UCBs, the ceiling would be Rs 2 lakh, it said, adding the enhanced ceiling would not be applicable to weak/sick entities.

RBI said the aggregate of unsecured advances granted by a UCB to its members as a whole would continue to be within the overall ceiling of 33 per cent of the bank’s DTL.

In line with the recommendations of the joint parliamentary committee , the RBI has decided that UCBs would be given a maximum period of six months from the date of inspection report to remove the irregularities pointed out in all respects, failing which RBI would invoke the penal provisions. UCBs have been advised to introduce concurrent audit with immediate effect.

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