RBI reiterates that there should not be any compromise on due diligence requirements
The Reserve Bank of India (RBI) has advised banks to clearly delineate the procedure for disposal of loan proposals, with appropriate timelines, and institute a suitable monitoring mechanism for reviewing applications pending beyond the specified period.The advise has come after, the RBI noticed that there have been inordinate delays on part of banks in conveying their credit decisions leading to delays in project implementation.
RBI has drawn banks' attention to the guidelines contained in 'Guidelines on Fair Practices Code for Lenders', wherein it is stipulated that the time frame within which loan applications up to Rs 2 lakh will be disposed of has to be indicated at the time of acceptance of loan applications. RBI felt that a similar practice of time bound decision making may be required in the case of other loans too.
Meanwhile, the RBI reiterated that there should not be any compromise on due diligence requirements. RBI suggested that banks may make suitable disclosures on the timelines for conveying credit decisions through their websites, notice-boards, product literature, etc.
Banks have been asked to put in place the system for timely disposal of loan proposals within 30 days.
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