Podcast
Questions and Answers
What should Urban Cooperative Banks (UCBs) include in their credit appraisal processes according to the text?
What should Urban Cooperative Banks (UCBs) include in their credit appraisal processes according to the text?
- Issuing credit cards to all customers
- Obtaining CIRs from Credit Information Companies (CICs) (correct)
- Establishing branches in rural areas
- Investing in real estate
What is the significance of UCBs reporting data to Credit Information Companies (CICs) as per the text?
What is the significance of UCBs reporting data to Credit Information Companies (CICs) as per the text?
- Enhances the speed of loan processing
- Increases the profit margins of UCBs
- Allows the CICs to populate their databases with corporate borrowers' data (correct)
- Helps in reducing the interest rates charged to borrowers
What should UCBs do after a period of six months according to the text?
What should UCBs do after a period of six months according to the text?
- Start using data available with the CICs for commercial / corporate borrowers (correct)
- Merge with other UCBs
- Close down operations
- Stop using data available with the CICs
What is the purpose of standardizing the data format for submission to CICs according to the text?
What is the purpose of standardizing the data format for submission to CICs according to the text?
What would be the data format known as, as mentioned in the text?
What would be the data format known as, as mentioned in the text?
Why are UCBs advised to start using data available with the CICs for commercial / corporate borrowers under a Board approved policy?
Why are UCBs advised to start using data available with the CICs for commercial / corporate borrowers under a Board approved policy?
What would a common Data Quality Index help UCBs with?
What would a common Data Quality Index help UCBs with?
How long is the recommended time period for UCBs to make efforts towards improving data quality?
How long is the recommended time period for UCBs to make efforts towards improving data quality?
What should UCBs consider when formulating or reviewing policies under the CICRA?
What should UCBs consider when formulating or reviewing policies under the CICRA?
Why should every UCB get the approval of their Board of Directors while formulating policies?
Why should every UCB get the approval of their Board of Directors while formulating policies?
What is detailed in Appendix - A for UCBs to follow?
What is detailed in Appendix - A for UCBs to follow?
What information should be obtained about existing loans from other SHGs where the individual is a member?
What information should be obtained about existing loans from other SHGs where the individual is a member?
What is the criteria for obtaining a CIC report from the bank?
What is the criteria for obtaining a CIC report from the bank?
What are the possible statuses of the SHG account mentioned in the text?
What are the possible statuses of the SHG account mentioned in the text?
In Phase I, when should the status of the SHG member's loan account be inquired?
In Phase I, when should the status of the SHG member's loan account be inquired?
What information should be obtained about the SHG member's loan account in Phase II?
What information should be obtained about the SHG member's loan account in Phase II?
What document is required to obtain information about the proposed loan amount from the group loan?
What document is required to obtain information about the proposed loan amount from the group loan?
What system can banks utilize to address the issue of delay in realizing bills?
What system can banks utilize to address the issue of delay in realizing bills?
When should banks open letters of credit (LCs) and deal with bills under LCs?
When should banks open letters of credit (LCs) and deal with bills under LCs?
Which type of borrowers should banks avoid providing fund based facilities like opening LCs to?
Which type of borrowers should banks avoid providing fund based facilities like opening LCs to?
From what date were UCBs allowed to negotiate LCs drawn under a specific UCB's restriction for non-borrower beneficiaries?
From what date were UCBs allowed to negotiate LCs drawn under a specific UCB's restriction for non-borrower beneficiaries?
What condition allows UCBs to negotiate LCs for non-borrower beneficiaries?
What condition allows UCBs to negotiate LCs for non-borrower beneficiaries?
What is the purpose of value dating of clients' accounts by banks?
What is the purpose of value dating of clients' accounts by banks?
What is the significance of the No Objection Certificate according to the text?
What is the significance of the No Objection Certificate according to the text?
Why do banks insist on a declaration from account holders regarding their credit facilities at other banks?
Why do banks insist on a declaration from account holders regarding their credit facilities at other banks?
What information should banks obtain if an account holder is a member of another cooperative society?
What information should banks obtain if an account holder is a member of another cooperative society?
What should a bank do if a borrower is already enjoying credit facilities from another bank?
What should a bank do if a borrower is already enjoying credit facilities from another bank?
Why is it important for banks to insist on obtaining a No Objection Certificate from the existing financing bank?
Why is it important for banks to insist on obtaining a No Objection Certificate from the existing financing bank?
What was the key change regarding foreclosure charges / prepayment penalties for individual borrowers as of June 26, 2014?
What was the key change regarding foreclosure charges / prepayment penalties for individual borrowers as of June 26, 2014?
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Study Notes
Credit Information and Reporting
- Urban Cooperative Banks (UCBs) should obtain Credit Information Reports (CIRs) from one or more Credit Information Companies (CICs) for all lending decisions and account opening.
- UCBs should report data on corporate borrowers to CICs in a timely manner, and start using CIC data after six months under a Board-approved policy.
Standardization of Data Format
- A standardized format for data submission to CICs, known as the "Uniform Credit Reporting Format", has been introduced to streamline the process.
- The format will be used for both consumer and commercial borrowers.
Letters of Credit and Bills
- Banks should only open letters of credit (LCs) and purchase/discount/negotiate bills under LCs for genuine commercial and trade transactions of their borrower constituents.
- Banks should not extend fund-based or non-fund-based facilities to non-constituent borrowers or non-constituent members of a consortium/multiple banking arrangement.
Data Quality Index
- A common Data Quality Index will help UCBs identify gaps in their data and improve their performance over time.
- The index will also enable UCBs to rank their performance against their peers and identify their relative position.
Best Practices for UCBs
- UCBs should adopt best practices while formulating or reviewing policies and procedures under the Credit Information Companies (Regulation) Act, 2005.
- The practices should be approved by the Board of Directors.
Uniform Credit Reporting Format
- The format includes information on existing loans, loan account status, borrower details, and loan amounts.
- The format also includes information on defaulted loans, settled loans, and loans under litigation.
Foreclosure Charges and Prepayment Penalty
- With effect from June 26, 2014, UCBs are not permitted to charge foreclosure charges or prepayment penalties on all floating-rate term loans sanctioned to individual borrowers.
Financing and Credit Facilities
- UCBs should not finance a borrower already availing credit facility from another bank without obtaining a 'No Objection Certificate' from the existing financing bank.
- UCBs should insist on a declaration from account holders regarding their credit facilities with other banks, and ascertain whether they are members of other co-operative societies or banks.
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