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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Reserve Bank of India (Urban Co-operative Banks - Credit Risk Management) Directions, 2025

28-Nov-2025 | RBI/DOR/2025-26/280 DOR.CRE.REC.199/07-02-005/2025-26

RBI has issued RBI (Urban Co-operative Banks - Credit Risk Management) Directions, 2025 effective from 28th November 2025. Key Highlights: 1. Applicability - All Urban Co-operative Banks (UCBs), meaning Primary Co-operative Banks as defined under the Banking Regulation Act (BR Act). 2. Board-Approved Credit Policies - Every UCB must create a comprehensive credit risk management policy approved by its Board, covering valuation, empanelment of valuers, and loan review. The Board must review this policy at least once a year. 3. Statutory Restrictions from BR Act - UCBs cannot give loans against their own shares and cannot write off debts of directors or related entities without RBI approval; any violation is invalid. 4. Restrictions on Loans to Directors & Relatives - Banks cannot give, renew, or extend any financial facility to directors, their relatives, or firms where they have interest, except for a few permitted categories like employee loans or loans secured by government securities. 5. Strict Monitoring of Loan Accounts - Banks must monitor end-use of funds, prevent misuse or diversion, strengthen follow-ups for stressed accounts, and take action when funds are misused, including treating certain cases as fraud. 6. Legal Entity Identifier (LEI) Requirements - Non-individual borrowers with total bank exposure of Rs. 5 crores and above must obtain and regularly renew their LEI code; otherwise, they cannot get new or renewed credit facilities. 7. Valuation, Security Filing & Working Capital Rules - Banks must adopt robust valuation policies with independent valuers, file all security interests in CERSAI, and follow RBI rules for working capital credit, including loan-cash credit split, interest rate differentiation, and proper review systems. For more information, please refer to the attached document.

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