BPD. Cir. 55 /13.05.00/2002-03

June 26, 2003

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

Dear Sir / Madam,

Fortnightly report on loans and advances granted
by UCBs to their directors, etc., up to September 30, 2003

Please refer to our Circular No. BPD.Cir.54/13.05.00/2002-03 dated June 24, 2003, advising the Primary (Urban) Co-operative Banks (UCBs), in response to the representations received, that the directions issued by the RBI on prohibition on granting of loans and advances (both secured and unsecured) to the directors, their relatives and the firms / concerns / companies in which they are interested, would become effective from October 1, 2003 (and not from April 29, 2003, as advised in circular UBD.No.BPD.Cir.50/13.05.00/2002-03 dated April 29, 2003).

2. It is reiterated that the loans and advances (both secured and unsecured), if any, granted to directors, etc. should strictly and scrupulously comply with all the guidelines issued by RBI for extension of loans and advances by UCBs, including:

1. careful assessment of requirement of finance based on proper credit appraisal in detail, documentation, and supervision over end-use of funds, etc. (refer to circular UBD. DC. 104 / R.1 / 1986-87 dated June 25, 1987 for details),
2. specific safeguards to be observed while providing cheque discounting facilities (circular UBD. No. I & L 21/ J-1-1887 –88 dated July 20, 1987)
3. exposure ceilings on single borrower and group-borrower at 20% and 50% of the bank’s capital funds ( vide circular DS. CIR. 31 / 13.05.00/ 1999-2000 dated April 1, 2000)
4. proper safeguards to be observed in regard to account opening procedures, custody of documents, loans against deposits, issue of guarantees/ letters of credit, prevention of diversion of funds, sanctioning of loans / other credit facilities, etc., (circular UBD. No. BSD-I / 8 / 12.05.00 / 2000-2001 dated November 9, 2000)

3. Further, loans and advances (both secured and unsecured) if any, granted by UCBs to directors, their relatives and the firms / concerns / companies in which they are interested, should also confirm to the prudential ceiling of 5 per cent of the bank’s demand and time liabilities (DTL) stipulated in circular No. UBD.DIR. 3 / 13.05.00 /2002-03 dated December 4, 2002.

4. The UCBs are advised that any deviations from the guidelines issued by RBI would be viewed seriously and would invite penalty as per the provisions of the Banking Regulation Act, 1949 (as applicable to Cooperative Societies).

5. The UCBs should forward a fortnightly report to the Chief General Manager in - Charge, Urban Banks Department, Reserve Bank of India, Central Office, Worli, Mumbai – 400018, giving details of loans granted to directors, etc., in the proforma enclosed, as also to the concerned Regional Office, beginning from July 15, 2003 and up to September 30, 2003.

Please acknowledge the receipt of the circular to our concerned Regional Offices.

Yours faithfully,

[ K. V. Rajan ]
Chief General Manager

ANNEXURE

Format of the fortnightly returns on Loans and Advances
granted by UCBs (both fund based and non fund- based) to their
directors, etc. to be submitted to RBI beginning from July
15, 2003 and up to September 30, 2003

Sr.No.	Name of the borrower(director, relative, etc.)	Amount	Purpose of the loan	Security obtained and margin for the credit facility	Whether the director / their relatives / firms / concerns / companies, in which they are interested, had, at any time,defaulted in repayment of any loan / advances
1	2	3	4	5	6