What changed
This Master Circular updates the previous July 2007 version by incorporating all instructions issued up to June 30, 2008. It consolidates multiple circulars into one document for easier reference. The structure and key restrictions remain largely unchanged, but the circular now reflects the latest regulatory positions.
What it means for you
Banks must ensure their lending policies align with the updated restrictions, especially on advances to directors, relatives, and for share-related activities. The circular reinforces existing prohibitions and regulatory limits, reducing ambiguity. Compliance with these consolidated guidelines is mandatory for all scheduled commercial banks except RRBs.
What you must do
- Review your bank's loan policy to ensure it matches all statutory and regulatory restrictions listed in the Master Circular.
- Update internal training materials and compliance checklists to reflect the consolidated guidelines.
- Verify that advances to directors, relatives, and officers comply with the specified limits and prohibitions.
- Ensure credit for buy-back of securities, sensitive commodities, and real estate adheres to the circular's conditions.
- Maintain records of all circulars consolidated (Annex 5) for audit and reference.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Credit and compliance departments, Board of directors and senior management, Loan officers handling retail, corporate, and real estate advances
Does this Master Circular introduce any new restrictions?
No, it consolidates existing instructions issued up to June 30, 2008, without adding new restrictions. It updates the previous July 2007 circular.
Are Regional Rural Banks (RRBs) covered by this circular?
No, the circular explicitly excludes RRBs. It applies only to all other Scheduled Commercial Banks.
What are the key statutory restrictions highlighted?
Key statutory restrictions include prohibitions on advances against the bank's own shares, loans to directors, and credit for buy-back of securities by companies.