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Thursday, May 10, 2012

RBI asks banks to share borrower's account information while transferring it with another bank

The Reserve Bank has asked banks to put in place a board approved policy for take over of accounts from another banks.

In a notification issued to banks on Thursday, India's banking regulator has asked that Banks should put in place a Board approved policy with regard to take-over of accounts from another bank.

"The policy may include norms relating to the nature of the accounts that may be taken over, authority levels for sanction of takeover, reporting of takeover to higher authorities, monitoring mechanism of taken over accounts, credit audit of taken over accounts, examination of staff accountability especially in case of quick mortality of such cases after takeover, periodic review of taken over accounts at Board /Board Committee level, Top Management level, etc." said the RBI notification.

The rationale behind this directive to banks is that the banking regulator has been receiving complaints that critical information on the health of the borrowal accounts being taken over is not being shared by the bank which transfers the loans account or transferor bank with the transferee bank or the bank which takes over the account. This results "in inadequate due diligence at the time of taking over of accounts." the RBI said.

In addition, before taking over an account, the transferee bank should obtain necessary credit information from the transferor bank as per the format prescribed in our circular dated December 8, 2008 on "Lending under Consortium Arrangement/Multiple Banking Arrangements". This would enable the transferee bank to be fully aware of the irregularities, if any, existing in the borrower's account(s) with the transferor bank, the RBI noted. The transferor bank, on receipt of a request from the transferee bank, should share necessary credit information as per the prescribed format at the earliest.

Source: EconomicTimes


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