New Delhi, Apr 3 (KNN)  In an effort to step up priority sector lending which goes to MSMEs among others, the Reserve Bank of India today allowed Urban Co-operative Banks (UCBs) to give unsecured loans and advances up to 25 per cent of their total asset.  Earlier this limit was 10 per cent.

“In order to promote lending to priority sectors and to provide impetus to the objective of financial inclusion it has been decided that UCBs  ( fulfilling the criteria)… may, with the prior approval of the Reserve Bank, grant unsecured loans (with or without surety) up to 25 per cent of their total assets,” said RBI in a circular to UCBs.

However the liberalisation is subject to certain conditions.  The entire loan portfolio of the bank should be covered under priority sector and it should be sanctioned as small value loans up to Rs 20,000 in a single account.

Also, the assessed gross Non Performing Assets (NPAs) of the UCB should be less than 10 per cent of gross advances. (KNN)