The Reserve Bank of India (RBI on Tuesday advised urban co-operative banks to review their loan policy by the board at least once in a financial year to ensure that the policy reflects approved internal risk appetite and remains in alignment with regulations.

 It has been observed that the policies in several urban co-operative banks not only lack comprehensive coverage but have also not been reviewed periodically, the central bank notification said.

According to a master circular issued by the Reserve Bank of India in April, urban co-operative banks are required to lay down, with the approval of their boards, transparent policies and guidelines for credit dispensation, in respect of each broad category of economic activity.

In addition, these lenders also need to keep in view the credit exposure norms and various other guidelines issued by the RBI from time to time, the master circular said. The RBI’s instructions will come into effect immediately, the notification said.

 "In order to make certain that the loan policy reflects approved internal risk appetite and remains in alignment with the extant regulations, it is advised that the loan policy of the bank shall be reviewed by the Board at least once in a financial year" the RBI said in a notification on Tuesday. The above instructions will come into effect immediately, RBI said.

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