Master Circular – Guarantees and Co-acceptances

RBI Master Circular Link

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:

Download: Master Circular – Guarantees and Co-acceptances

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