What changed
This master circular updates the previous version dated July 1, 2009 by incorporating all instructions issued up to June 30, 2010. It consolidates the entire set of statutory and regulatory restrictions on loans and advances into a single reference document.
What it means for you
Banks must ensure their lending policies and practices comply with the updated restrictions, including those on advances to directors, relatives, officers, and sensitive sectors like real estate and shares. Non-compliance could attract regulatory action. The circular serves as a one-stop reference for all lending restrictions.
What you must do
- Review your bank's lending policies to ensure alignment with all statutory and regulatory restrictions listed in the master circular.
- Update internal compliance checklists to cover restrictions on advances to directors, relatives, officers, and sensitive commodities.
- Train credit and compliance teams on the updated restrictions, especially those on share-backed lending, real estate, and NBFC financing.
- Ensure systems are in place to monitor and report any breaches of the restrictions to the board and RBI as required.
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 priority sector advances
Does this master circular apply to Regional Rural Banks?
No, the circular explicitly excludes Regional Rural Banks (RRBs) from its scope.
What are the key statutory restrictions covered?
Key statutory restrictions include prohibitions on advances against a bank's own shares, advances to bank directors, restrictions on holding shares in companies, and limits on credit for buy-back of securities.
Are there any restrictions on loans to relatives of directors?
Yes, the circular includes regulatory restrictions on granting loans and advances to relatives of directors, as well as to officers and relatives of senior officers.