What changed
This Master Circular updates the previous version from April 1, 2023, by incorporating all instructions issued up to March 31, 2024. It explicitly states that no new guidelines have been introduced; it is purely a consolidation exercise.
What it means for you
Banks can rely on this circular as a single reference for all existing guarantee and co-acceptance rules. The unchanged framework means existing compliance practices remain valid, but banks should update their internal manuals to reference this latest circular.
What you must do
- Review and update internal policy documents to reference this Master Circular (DOR.STR.REC.2/13.07.010/2024-25).
- Ensure guarantee portfolios comply with the 10-year maturity cap (normally not exceeding 10 years, but longer maturities allowed for project loans exceeding 10 years with board-approved policy) and other existing norms.
- Reinforce fraud prevention measures as per Ghosh Committee recommendations and internal control systems.
- Verify that guarantees for NBFCs or non-bank entities adhere to the restrictions in para 2.4.
Who it affects
All Scheduled Commercial Banks (excluding Payments Banks and RRBs), Bank guarantee and credit departments, Compliance and risk management teams
Does this circular introduce any new requirements for issuing guarantees?
No, this is a consolidation of all existing instructions up to March 31, 2024, with no new guidelines added.
What is the maximum maturity allowed for a bank guarantee?
Bank guarantees should normally not exceed 10 years, though longer maturities may be considered for project loans exceeding 10 years, subject to board-approved policy.
Which banks are excluded from this circular?
Payments Banks and Regional Rural Banks (RRBs) are not covered by this Master Circular.