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The RBI has increased the limit on small-value loans from UCBs to Rs 3 crore per borrower

Published on February 25, 2025
Current Context: On February 24, 2025, the Reserve Bank of India (RBI) increased the limit on small-value loans from Urban Co-operative Banks (UCBs) to ₹3 crore per borrower.
The RBI has increased the limit on small-value loans from UCBs to Rs 3 crore per borrower
  • This move aims to enhance the financial soundness and resilience of UCBs by allowing them greater operational flexibility while maintaining regulatory objectives.
Here are the key points:
  • New Loan Limit: The limit on small-value loans has been increased to ₹3 crore per borrower. This allows UCBs to offer larger loans to individuals and businesses.
  • Regulatory Definition: Small-value loans now include loans of value not more than ₹25 lakh or 0.4% of UCBs' Tier I capital, whichever is higher, subject to the ₹3 crore ceiling.
  • Operational Flexibility: UCBs now have greater operational flexibility, enabling them to better meet the financial needs of their customers.
  • Financial Resilience: The move is aimed at improving the financial resilience and soundness of UCBs, ensuring they can provide stable and sustainable banking services.

Question:

Q.1 What is the new loan limit per borrower for small-value loans from Urban Co-operative Banks (UCBs) as per the RBI’s February 24, 2025, announcement?
a) ₹3 crore
b) ₹2 crore
c) ₹1 crore
d) ₹5 crore

Answer: a) The Reserve Bank of India (RBI) increased the loan limit for small-value loans from UCBs to ₹3 crore per borrower. This provides greater financial flexibility to UCBs while maintaining regulatory oversight.
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