Source: News on Air
Why in News?
The Reserve Bank of India (RBI) has issued draft norms proposing changes in the unsecured loan exposure limits for Urban Cooperative Banks (UCBs).
Higher Unsecured Loan Limit for Urban Cooperative Banks
Key Proposal
- The RBI has proposed raising the unsecured loans cap for UCBs to 20% of total advances of the preceding financial year, from the earlier limit of 10% of total assets.
- The move is part of revised draft norms to rationalise the definition of unsecured advances.
Individual Exposure Limits
Within the overall ceiling, individual unsecured loan limits will be:
- ₹5 lakh – Tier I UCBs
- ₹7.5 lakh – Tier II UCBs
- ₹10 lakh – Tier III & IV UCBs
What are Unsecured Loans?
Unsecured loans are loans that are not backed by collateral or security. The lender does not have any claim over a specific asset if the borrower defaults.
Examples of Unsecured Loans
- Personal loans
- Credit card loans
- Consumer durable loans
- Education loans (in many cases)
- Short-term business loans (without collateral)
