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ARTICLE · 06 MARCH 2025

RBI Reviews And Rationalizes Prudential Norms For UCBs

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The Reserve Bank of India ("RBI"), vide notification dated February 24, 2025, has reviewed, and rationalized various prudential norms for Urban Co-operative Banks ("UCBs") ("Notification") as under:

IndiaFinance and Banking
Nidhi Arya
Nidhi Arya
Apoorva Soni
Apoorva Soni
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The Reserve Bank of India ("RBI"), vide notification dated February 24, 2025, has reviewed, and rationalized various prudential norms for Urban Co-operative Banks ("UCBs") ("Notification") as under:

1. Increased Limit for Small Value Loans:

UCBs were previously required to ensure that at least 50% (fifty percent) of the loans sanctioned by them were 'small value loans', i.e., of a value of up to Rs. 25,00,000 (Indian Rupees twenty five lakh) or 0.2% (zero point two percent) of Tier I capital, whichever was higher, with a maximum limit of Rs. 1,00,00,000 (Indian Rupees one crore) per borrower, by March 31, 2026. The revised limits under the Notification now allow small value loans up to Rs. 25,00,000 (Indian Rupees twenty-five lakh) or 0.4% (zero-point four percent) of Tier I capital, whichever is higher, up to a maximum of Rs. 3,00,00,000 (Indian Rupees three crore) per borrower. However, the Board of UCB is required to monitor loan portfolios and it may set

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