What changed
RBI reinforced its 2008 guidelines on information sharing among banks, citing rising NPAs and restructured loans due to poor data exchange. Banks must now implement an effective sharing mechanism by end-December 2012. From January 1, 2013, all loan sanctions or renewals require prior sharing of credit, derivatives, and unhedged foreign currency exposure details.
What it means for you
Banks can no longer sanction loans without verifying a borrower's total exposure across the system, reducing the risk of hidden debt and fraud. This will improve asset quality by preventing over-leverage and unhedged risks. Lenders must invest in systems for quarterly data exchange or face RBI penalties.
What you must do
- Set up a mechanism for sharing credit, derivatives, and unhedged FX exposure data with other banks by December 31, 2012.
- Ensure all loan sanctions, renewals, or ad hoc loans from January 1, 2013, are preceded by obtaining and sharing required borrower information.
- Exchange borrower account conduct data with other banks at least quarterly, as per the format specified in the 2008 circular.
- Review and update internal processes to include derivative and unhedged FX exposure details in information-sharing protocols.
Who it affects
All scheduled commercial banks (excluding RRBs), Credit risk and loan sanctioning teams, Borrowers with multiple banking relationships or large unhedged FX exposures
What happens if we don't share information by the deadline?
RBI will view non-adherence seriously and may impose penalties or other actions as deemed appropriate.
Does this apply to existing borrowers or only new ones?
It applies to both new and existing borrowers for any fresh loans, ad hoc loans, or renewals from January 1, 2013.
What specific information must be shared?
Credit facilities, derivative transactions, and unhedged foreign currency exposures of borrowers, as per the format from the 2008 circular.