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RBI asks UCBs provisioning on interbank exposure under all-inclusive directions

RBI asks UCBs provisioning on interbank exposure under all-inclusive directions

The Reserve Bank of India (RBI) has asked urban co-operative banks (UCBs) having inter-bank deposits with a UCB under all-inclusive directions (AID) to fully provide for this exposure within five years at the rate of 20 per cent annually.

Further, UCBs non-performing exposures arising from discounted bills drawn under LCs (letters of credit) issued by a UCB under AID also have to be similarly provided for.

There are a host of UCBs, including the Punjab and Maharashtra Co-operative (PMC) Bank, which have been placed under AID in the last few years on account of deterioration in their financial health. This directive will impact the profitability of UCBs having inter-bank exposure to UCBs under AID.

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