Banks Must Follow Prescribed Format on Loan Take-Overs: RBI

The Reserve bank of India (RBI) asked all banks to have a board approved policy with regard to take-over of loans from one bank to the other. RBI said that critical information regarding health of the borrowal loans taken over is not being shared with the transferee bank by the transferor bank.

In order to reduce such inadequate due diligence, RBI directed that the policy should include norms relating to the nature of the borrower’s accounts (loans) being taken over along with the details of the authority levels for sanction of take-over and reporting of take-over to the higher authorities.

Further banks must ensure the credit audit of such taken over accounts at Board/Board committee level/Top management level. The central bank has prescribed a format for banks to obtain the necessary credit information from the transferor to the transferee before taking over a loan. This may enable the transferee bank to get complete information of the borrower’s account along with irregularities, if any, in the borrower’s account with the transferor bank.

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