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.
Guidelines:
General guidelines include ensuring that guarantees are issued in accordance with the bank’s board-approved policy, and that they are properly documented and recorded.
Conduct of Guarantee Business:
Norms for unsecured advances and guarantees, precautions for issuing guarantees, and measures to prevent frauds are outlined.
Specific Guidelines:
Guidelines are provided for guarantees on behalf of banks’ directors, the Bank Guarantee Scheme of the Government of India, and guarantees on behalf of share and stock brokers/commodity brokers.
Internal Control Systems:
Banks are required to have an effective internal control system in place to monitor and manage their guarantee business.
Personal Guarantees:
Guidelines are provided for obtaining personal guarantees of promoters, directors, other managerial personnel, and shareholders of borrowing concerns.
Chat with the Master Circular: