Rbi Seeks Fortnightly Report On Insider Lending By Coops

The Reserve Bank of India (RBI) has sought a fortnightly report on loans and advances granted by UCBs to their directors and their relatives up to September 30, 2003 to ensure that there is no misuse of its deferment of the ban on insider lending.

The central bank has also warned that any deviations from the guidelines issued by it would be viewed seriously and invite penalty as per the provisions of the Banking Regulation Act, 1949 (as applicable to Cooperative Societies).

The RBI had deferred the prohibition on granting of loans and advances (both secured and unsecured) by UCBs to the directors, their relatives and the firms / concerns / companies in which they are interested from April 29 to October 1, 2003 on the back of strong representations from UCBs. Loans and advances (both secured and unsecured), if any, granted to directors, etc.

 

should strictly and scrupulously comply with all the guidelines issued by RBI for extension of loans and advances by UCBs, including: careful assessment of requirement of finance based on proper credit appraisal in detail, documentation, and supervision over end-use of funds, etc.

The RBI observed that there should be specific safeguards to be observed while providing cheque discounting facilities and exposure ceilings on single borrower and group-borrower at 20% and 50% of the bank