What changed
RBI withdrew consortium lending prescriptions in 1996 for flexibility, but after CVC flagged frauds due to poor info sharing, RBI now mandates banks to obtain borrower declarations on existing credit, exchange account conduct data quarterly via Annex II, and use CIBIL reports.
What it means for you
Banks must strengthen due diligence by collecting credit history from borrowers and sharing account conduct with other lenders quarterly. This reduces fraud risk but increases operational burden for loan monitoring and compliance. Lenders must update loan agreements to include info-sharing clauses.
What you must do
- Obtain Annex I declaration from new borrowers about existing credit facilities from other banks.
- Seek Annex I declaration from existing borrowers with limits of Rs.5 crore and above or where multiple banking is known.
- Exchange borrower account conduct information with other banks using Annex II format at least quarterly.
- Obtain annual compliance certification from a professional (preferably Company Secretary) as per Annex III.
- Incorporate credit information exchange clauses in new loan agreements and at next renewal for existing facilities.
Who it affects
All scheduled commercial banks (excluding RRBs and LABs), Borrowers with credit facilities from multiple banks, Loan officers and credit risk teams, Compliance departments
What is the threshold for existing borrowers to provide a declaration?
Existing borrowers with sanctioned limits of Rs.5 crore and above, or wherever the bank knows the borrower has credit from other banks, must provide a declaration.
How often must banks exchange borrower conduct information?
Banks must exchange information about the conduct of borrowers' accounts with other banks at least at quarterly intervals using Annex II format.
What should banks do about loan agreements for existing facilities?
Banks should incorporate suitable clauses regarding exchange of credit information at the time of next renewal of existing facilities to address confidentiality issues.