What changed
This master circular updates the previous July 1, 2011 version by incorporating all instructions issued up to June 30, 2012. It consolidates existing guidelines without introducing new policy changes, serving as a single reference document for banks.
What it means for you
Banks must ensure their guarantee and co-acceptance practices align with the consolidated framework, which emphasizes risk sensitivity and fraud prevention. The circular reinforces the importance of managing contingent liabilities as part of overall asset quality assessment.
What you must do
- Review and update internal policies on guarantees and co-acceptances to match the consolidated guidelines.
- Strengthen internal control systems and fraud prevention measures as per the Ghosh Committee recommendations.
- Ensure compliance with restrictions on guarantees for inter-company deposits, NBFC placements, and inter-institutional guarantees.
- Train staff on the updated procedures for payment of invoked guarantees and precautions for letters of credit.
Who it affects
All scheduled commercial banks (excluding Regional Rural Banks), Bank guarantee and credit departments, Risk management and compliance teams
Does this circular introduce any new requirements for banks?
No, it consolidates existing instructions up to June 30, 2012, without adding new requirements. Banks should use it as a single reference for all guarantee and co-acceptance guidelines.
Which banks are covered under this master circular?
All scheduled commercial banks are covered, except Regional Rural Banks (RRBs).
What are the key areas covered in the guidelines?
The circular covers general guidelines, conduct of guarantee business, foreign exchange-related guarantees, restrictions on inter-company deposits and NBFC placements, payment of invoked guarantees, co-acceptance of bills, and precautions for letters of credit.