The banking regulator RBI has directed urban cooperative banks (UCBs) to have a board review of its loan policy a minimum of once a year with immediate effect, reported Economic Times.
“In order to ensure that the loan policy reflects approved internal risk appetite and remains in alignment with the extant regulations, it is advised that the loan policy of the bank shall be reviewed by the Board at least once in a financial year,” the RBI said in a notification on Tuesday.
The banking regulator noted that it has been observed in several UCBs that these policies not only lack comprehensive coverage but also do not require a periodic review, reported ET.
According to the April master guidelines issued by RBI, UCBs are required to lay down, with the approval of their boards, transparent policies and guidelines for credit dispensation, in respect of each broad category of economic activity, keeping in view the credit exposure norms and various other guidelines issued by Reserve Bank from time to time.
RBI has lately taken a number of measures to strengthen the cooperative banking structure.
The banking regulator has prescribed a minimum net worth of ₹2 crore for Tier-I UCBs operating in a single district and ₹5 crore for all other UCBs (of all tiers) which is expected to strengthen their financial resilience.