Master Circular: Loans and Advances – Statutory and Other Restrictions
This circular outlines the guidelines and restrictions on loans and advances by banks, covering both statutory and regulatory requirements.
Statutory Restrictions:
Advances against bank’s own shares are prohibited, as are advances to bank’s directors. There are also restrictions on holding shares in companies and credit to companies for buy-back of their securities.
Regulatory Restrictions:
Loans and advances to relatives of directors are restricted, and lending to directors and their relatives on a reciprocal basis is not permitted. Additionally, there are restrictions on granting loans and advances to officers and relatives of senior officers of banks.
Other regulatory restrictions include:
– Restrictions on financial assistance to industries producing/consuming ozone depleting substances (ODS)
– Restrictions on advances against sensitive commodities under Selective Credit Control (SCC)
The circular aims to ensure that banks operate within the prescribed guidelines and restrictions, maintaining the integrity and stability of the banking system.
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Download: Master Circular- Loans and Advances – Statutory and Other Restrictions