Podcast
Questions and Answers
What is the purpose of undertaking an annual review of advances by banks?
What is the purpose of undertaking an annual review of advances by banks?
- Issuing new loans to borrowers
- Assessing working capital requirements and adherence to lending norms (correct)
- Implementing new banking software
- Increasing interest rates on existing loans
Why is the valuation of fixed assets owned by banks and accepted as collateral considered significant?
Why is the valuation of fixed assets owned by banks and accepted as collateral considered significant?
- To attract more borrowers
- To increase the number of loan approvals
- For accurate measurement of capital adequacy position (correct)
- To decrease the interest rates on loans
What should be the consequence for banks when diversion of funds is observed?
What should be the consequence for banks when diversion of funds is observed?
- Increasing the sanctioned limits
- Issuing new loans without proper monitoring
- Reducing the required collateral
- Recalling the loans and charging penal interest (correct)
Why is it essential for banks to have a mechanism for monitoring the end use of funds?
Why is it essential for banks to have a mechanism for monitoring the end use of funds?
What is the primary objective of debt restructuring as per the text?
What is the primary objective of debt restructuring as per the text?
What is advised for Urban Cooperative Banks (UCBs) regarding the valuation of fixed assets?
What is advised for Urban Cooperative Banks (UCBs) regarding the valuation of fixed assets?
Which of the following is NOT required for successful debt restructuring?
Which of the following is NOT required for successful debt restructuring?
How can banks effectively monitor advances according to the text?
How can banks effectively monitor advances according to the text?
What is the minimum amount of wilful default that scheduled UCBs should examine and file suits against, according to the text?
What is the minimum amount of wilful default that scheduled UCBs should examine and file suits against, according to the text?
What additional action should UCBs take in cases of wilful default where there are instances of cheating or fraud by the borrowers?
What additional action should UCBs take in cases of wilful default where there are instances of cheating or fraud by the borrowers?
Which of the following is NOT a requirement mentioned in the text for scheduled UCBs to ensure appropriate certification by auditors?
Which of the following is NOT a requirement mentioned in the text for scheduled UCBs to ensure appropriate certification by auditors?
Which of the following is true regarding the prudential guidelines on debt restructuring mentioned in the text?
Which of the following is true regarding the prudential guidelines on debt restructuring mentioned in the text?
What action should banks take to promote payment discipline among borrowers?
What action should banks take to promote payment discipline among borrowers?
In what situation would providing finance against discounting of services sector bills be viewed as unsecured advance?
In what situation would providing finance against discounting of services sector bills be viewed as unsecured advance?
What is the consequence of banks entering into Repo transactions using bills discounted as collateral?
What is the consequence of banks entering into Repo transactions using bills discounted as collateral?
How should Urban Cooperative Banks (UCBs) approach lending to Self Help Groups (SHGs) / Joint Liability Groups (JLGs)?
How should Urban Cooperative Banks (UCBs) approach lending to Self Help Groups (SHGs) / Joint Liability Groups (JLGs)?
What leads to penal action from the Reserve Bank of India according to the text?
What leads to penal action from the Reserve Bank of India according to the text?
What should be a part of the overall credit policy of Urban Cooperative Banks (UCBs) when lending to SHGs / JLGs?
What should be a part of the overall credit policy of Urban Cooperative Banks (UCBs) when lending to SHGs / JLGs?
What is the purpose of the Technical Working Group mentioned in the text?
What is the purpose of the Technical Working Group mentioned in the text?
Which types of financial institutions are represented in the Technical Working Group?
Which types of financial institutions are represented in the Technical Working Group?
What is the purpose of sharing the logic and validation processes involved in data acceptance with UCBs?
What is the purpose of sharing the logic and validation processes involved in data acceptance with UCBs?
What is the expected timeline for UCBs to rectify rejected data and upload it with the CICs?
What is the expected timeline for UCBs to rectify rejected data and upload it with the CICs?
What is the purpose of making the rejection reports simple and understandable for UCBs?
What is the purpose of making the rejection reports simple and understandable for UCBs?
What is the main objective of the Uniform Credit Reporting Format mentioned in the text?
What is the main objective of the Uniform Credit Reporting Format mentioned in the text?
What is the primary requirement for banks to admit members?
What is the primary requirement for banks to admit members?
What is the Reserve Bank of India's view on UCBs financing companies involved in leasing and hire purchase business?
What is the Reserve Bank of India's view on UCBs financing companies involved in leasing and hire purchase business?
What is the maximum bank credit that can be extended to companies engaged in equipment leasing and hire purchase?
What is the maximum bank credit that can be extended to companies engaged in equipment leasing and hire purchase?
What is the minimum requirement for a bank to be permitted to finance companies involved in leasing and hire purchase business?
What is the minimum requirement for a bank to be permitted to finance companies involved in leasing and hire purchase business?
What is the maximum borrowing limit for companies engaged in equipment leasing and hire purchase?
What is the maximum borrowing limit for companies engaged in equipment leasing and hire purchase?
What is the primary focus of banks, according to the text?
What is the primary focus of banks, according to the text?
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Study Notes
Banking Guidelines
- Quick disposal of enquiries by banks and award of deterrent punishment is necessary in cases of default
- Annual review of advances is necessary for effective monitoring, including assessment of working capital requirements of borrowers
Valuation of Properties
- Banks should put in place a system for realistic valuation of fixed assets and empanelment of valuers
- Guidelines for valuation and empanelment are provided in Annex-1
Diversion of Funds
- Banks should have a mechanism for proper monitoring of end use of funds
- Appropriate action should be taken in cases of diversion, including recalling loans and reduction of sanctioned limits
Recovery of Dues
- Banks should examine cases of wilful defaults of ₹1 crore and above and file suits
- Banks should also examine cases of cheating/fraud by defaulting borrowers and file criminal cases
Prudential Guidelines on Restructuring of Advances
- The objective of restructuring is to preserve economic value of units, not to evergreen problem accounts
- Prudential guidelines will be applicable to all categories of debt restructuring except those due to natural calamities
Loan Disclosures
- Corporate and other constituent borrowers with a turnover above a threshold level should disclose an 'aging schedule' of their overdue payables in their periodical returns
Loans to Self-Help Groups (SHGs) / Joint Liability Groups (JLGs)
- Banks can lend to SHGs and JLGs as per their Board-approved policy
- The lending policy should include the maximum amount of loan, interest rate, and other details
Technical Working Group
- A Technical Working Group will be constituted to review and make changes to data formats
- The Group will incorporate additional fields as detailed in Appendix - B
Rectification of Rejected Data
- CICs should share logic and validation processes with banks to minimize data rejection
- Rejection reports should be simple and understandable to fix reporting and data level issues
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