The Reserve Bank of India (RBI) has asked urban co-operative banks (UCBs) not to grant large value loans to public sector/government undertakings.

In a letter to the chief executive officers of all primary (urban) co-operative banks, the RBI said, “UCBs are meant primarily to meet the credit needs of the society by providing loans and advances to low/middle income groups (small borrowers), agriculture and small businesses for furthering the cause of co-operation.” Grant of high value loans to PSUs was not consistent with the co-operative principles, it said. This only diluted the co-operative character of UCBs, it pointed out.

The RBI letter follows its observation that a few urban co-operative banks (UCBs) have been sanctioning high value loans to public sector undertakings (PSUs) by admitting them as nominal members or otherwise.

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