Master Circular – Guarantees and Co-acceptances
This circular provides guidelines for Scheduled Commercial Banks (excluding Payments Banks and RRBs) on guarantees and co-acceptances.
Purpose: To provide a framework for banks to manage their guarantee business effectively.
Classification: Guarantees are classified into two categories: financial guarantees and performance guarantees.
General Guidelines: Banks should have a board-approved policy for guarantee business, ensure adequate risk assessment, and maintain a record of all guarantees issued.
Guidelines for Conduct of Guarantee Business:
Norms for unsecured advances and guarantees, precautions for issuing guarantees, and measures to prevent frauds are outlined.
Specific Guidelines:
Guidelines for guarantees on behalf of banks’ directors, the Bank Guarantee Scheme of Government of India, and guarantees for share and stock brokers/commodity brokers are provided.
Internal Control Systems: Banks should have robust internal control systems to monitor and manage their guarantee business.
Personal Guarantees: Guidelines for obtaining personal guarantees of promoters, directors, and other managerial personnel of borrowing companies are outlined.
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