Page 512 - ES 2020-21_Volume-1-2 [28-01-21]

Monetary Management and Financial Intermediation 139

e. Monetary policy transmission – external benchmarking of loans: RBI deregulated
the interest rates on advances by SCBs (excluding RRBs). With a view to strengthen
the transmission of monetary policy, the banks were mandated to link all new floating
rate personal or retail loans and floating rate loans extended to MSMEs to external
benchmarks such as repo rate, Treasury Bill Rate and any external benchmark
published by Financial Benchmarks India Pvt Ltd (FBIL). Banks can offer such
external benchmark linked loans to other types of borrowers as well. In order to
ensure transparency, standardisation, and ease of understanding of loan products by
borrowers, banks were also advised to adopt a uniform external benchmark within
a loan category. Under the external benchmark system, the interest reset period for
loans was also reduced to three months with a view to pass on the benefit of reduction
in policy repo rate to the borrowers more frequently. Further, to make the benefit of
external benchmark linked interest rate regime available to the existing borrowers
(Base Rate/MCLR), banks were advised to provide a switchover option to such
borrowers on mutually agreed terms.

Co-operative Bank

a. Revision in the target for priority sector lending: To promote financial inclusion,
the overall priority sector lending target for Urban Co-operative Banks has been
increased from the present level of 40 per cent of adjusted net bank credit (ANBC)
or credit equivalent amount of off-balance sheet exposure (CEOBSE), whichever is
higher, to 75 per cent of ANBC or CEOBSE, whichever is higher by March 31, 2024.

b. Inclusion of co-operative banks as eligible member lending institutions under
interest subvention scheme for MSMEs - issuance of guidelines: All co-operative
banks have been advised of their inclusion as Eligible Lending Institutions under
the “Interest Subvention Scheme (ISS) for MSMSEs 2018” of the Government. This
scheme provides an interest relief of two per cent per annum to eligible MSMEs on
their outstanding fresh/incremental term loan/working capital during the period of its
validity.
c. Reporting of large exposures to Central Repository of Information on Large Credits
(CRILC): Urban Cooperative Banks (UCBs) with assets of `500 crore and above
were brought under the CRILC reporting framework. Accordingly, UCBs shall report
credit information, including classification of an account as Special Mention Account
(SMA), on all borrowers having aggregate exposures of `5 crore and above with them
to CRILC.

d. Limits on exposure to single and group borrowers and large exposures: The exposure
norms for single borrower and a group of borrowers from 15 per cent and 40 per cent
of UCB’s capital funds, to 15 per cent and 25 per cent, respectively, of UCB’s Tier-I
capital. The revised exposure limits shall apply to all types of fresh exposures taken
by UCBs, and they shall bring down their existing exposures which are in excess of
the revised limits to within the aforesaid revised limits by March 31, 2023. Further,