RBI asks urban co-op banks not to grant high value loans to PSUs

Mumbai: The Reserve Bank of India has asked urban co-operative banks (UCBs) not to grant large value loans to PSU firms saying their core purpose is to serve the low and  middle income groups. RBI also stated that it was brought to its notice that some UCBs were  sanctioning loans of big amount to public sector undertakings  (PSUs) by admitting them as nominal members or otherwise. 

"In view of the above, UCBs are advised, as a matter of  principle, generally not to grant large value loans to Public  Sector/Government Undertakings," RBI said in a communication  addressed to UCBs.  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 cooperation. 

"Grant of high value loans to PSUs is not consistent with  the co-operative principles and dilutes the cooperative  character of UCBs," added  RBI.