Banking Regulations and Risk Management

CozyBerkelium avatar
CozyBerkelium
·
·
Download

Start Quiz

Study Flashcards

29 Questions

What is the primary focus of the Master Circular issued for Urban Co-operative Banks?

Exposure norms and statutory restrictions

What type of advances have a specific ceiling?

Unsecured advances

What is a specific restriction mentioned in the Master Circular?

Granting loans to relatives of directors

What type of activities are specifically mentioned in the Master Circular?

Agricultural activities

What is a specific type of loan mentioned in the Master Circular?

Bridge loans

What is the basis for determining Tier-I capital for the purpose of computation?

Prudential Norms on Capital Adequacy

What type of exposure is included in the computation of credit exposure?

Funded and non-funded credit limits, and underwriting and similar commitments

What type of entities are specifically mentioned in the Master Circular?

Non-banking financial companies

What is excluded from credit exposure?

Loans and advances granted against the security of bank's own term deposits

What is considered for arriving at credit exposure limit?

The higher of the sanctioned limit or outstanding amount

What type of securities are included in investment exposure?

Non-SLR securities

What is a necessary step for UCBs before admitting leasing/hire purchase companies as members?

Obtain prior approval of the Registrar of Co-operative Societies concerned

What is the minimum working capital fund required for UCBs to finance NBFC-ICC?

₹25 crores

What percentage of assets in equipment leasing and hire purchase is required for NBFC-ICC?

75%

What is the maximum limit on bank finance for NBFC-ICC in terms of Net Owned Funds (NOF)?

3 times of NOF

What type of leases are allowed for bank finance to leasing concerns?

Full payout leases

What is the ceiling on borrowing by NBFCs in terms of Net Owned Funds (NOF)?

10 times of NOF

Beyond the 10 per cent ceiling, what additional limit is allowed for granting housing loans to individuals?

5 per cent of total assets

How can total assets be reckoned for the purpose of exposure norms?

Based on the audited balance sheet as on March 31 of the preceding financial year

What type of loans given by UCBs is exempted from the prescribed limit?

Working capital loans against hypothecation of construction materials

What is the maximum individual housing loan amount for Tier-1 UCBs?

₹60 lakh per individual borrower

What is the guiding provision for Prudential Inter-bank Exposure Limit?

Chapter VIII of Master Direction on Classification, Valuation and Operation of Investment Portfolio of UCBs

What is the governing provision for Placement / acceptance of Deposits by UCBs?

Chapter VIII of Master Direction on Classification, Valuation and Operation of Investment Portfolio of UCBs

What is the date of the First Bi-monthly Monetary Policy Statement 2015-16?

28.03.2014

What is the subject of Master Circular No. 11?

Exposure Norms and Statutory / Other Restrictions

What is the purpose of Circular No. 13/09.22.010/2013-14?

Loans for repairs / additions / alterations – enhancement of limits

What is the subject of Circular No. 45/13.05.000/2012-13?

Unsecured credit exposure norms for UCBs

What is the subject of Circular No. 31/13.05.000/2011-12?

Exposure to Housing, Real Estate and Commercial Real Estate

What is the subject of Circular No. 69/09.22.010/2009-10?

Maximum Limit on Unsecured Loans and Advances

Study Notes

Tier-I Capital and Exposure Norms

  • Tier-I capital for computation of capital adequacy of UCBs is as prescribed in Master Circular dated April 20, 2023, as amended from time to time
  • Exposure includes both credit exposure (Loans and Advances) and investment exposure (Non-SLR securities)

Credit Exposure

  • Credit exposure includes funded and non-funded credit limits, underwriting and similar commitments, and facilities extended by way of equipment leasing and hire purchase financing
  • Credit exposure excludes loans and advances granted against the security of bank's own term deposits
  • The sanctioned limit or outstanding whichever is higher shall be reckoned for arriving at credit exposure limit

Housing Loans and Real Estate Exposure

  • Ceiling of 10 per cent of total assets can be exceeded by an additional limit of 5 per cent of total assets for the purpose of grant of housing loans to individuals
  • Total assets may be reckoned based on the audited balance sheet as on March 31 of the preceding financial year
  • Working capital loans given by UCBs against hypothecation of construction materials provided to the contractors who undertake comparatively small construction on their own without receiving advance payments is exempted from the prescribed limit
  • UCBs are not permitted to exceed the limit prescribed for grant of housing, real estate, commercial real estate loans to the extent of funds obtained from higher financing agencies and refinance from National Housing Bank
  • Tier-1 UCBs are permitted to extend individual housing loans up to a maximum of ₹60 lakh per individual borrower and UCBs categorized in Tier-2 to 4 can extend individual housing loans up to a maximum of ₹140 lakh per individual borrower subject to extant prudential exposure limits

Inter-bank Exposure Limit

  • UCBs shall be guided by provisions contained at Para 14.1 (a) of chapter VIII of the Master Direction on ‘Classification, Valuation and Operation of Investment Portfolio of UCBs’ dated April 1, 2023, as updated from time to time for Prudential Inter-bank (Gross) Exposure Limit
  • UCBs shall be guided by provisions contained at Para 14.1 (b) of chapter VIII of the Master Direction on ‘Classification, Valuation and Operation of Investment Portfolio of UCBs’ dated April 1, 2023, as updated from time to time for Prudential Inter-bank Counterparty Limit

Placement/Acceptance of Deposits and Other Restrictions

  • Placement/acceptance of deposits by UCBs shall be subject to instructions contained under Chapter VIII of Master Direction on Classification, Valuation and Operation of Investment Portfolio of UCBs dated April 1, 2023, as amended from time to time
  • UCBs are categorised under respective tiers in terms of the circular DOR.REG.No.84/07.01.000/2022-23 dated December 1, 2022
  • It is necessary for UCBs to obtain prior approval of the Registrar of Co-operative Societies concerned before admitting such leasing/hire purchase companies as members

Financing to NBFCs and Other Activities

  • UCBs, with working capital funds aggregating to ₹25 crores and above, may finance the NBFC Investment and Credit Companies (NBFC-ICC), subject to the following limits
  • Eligible NBFC-ICCs are those having not less than 75 per cent of their assets in equipment leasing and hire purchase, and 75 per cent of their gross income from these two types of activities as per the last audited balance sheet of the companies

Test your knowledge of banking regulations and risk management practices, including exposure norms, loan thresholds, and limits on unsecured advances. Learn about the rules governing banking operations and risk assessment.

Make Your Own Quizzes and Flashcards

Convert your notes into interactive study material.

Get started for free

More Quizzes Like This

Use Quizgecko on...
Browser
Browser