RELATIVES OF SENIOR OFFICERS OF BANK BY ASTHA MISRA LL.M 1 ST SEMESTER BANKING AND FINANCE MEANING OF LOANS AND ADVANCES The term Loan has been defined by the Supreme Court in the case of Canara Bank v. P.R.N. Upadhyaya, (1998).
The term Advances has not been defined any where the Indian law but in general it means credit facility granted by the bank. RESTRICTION ON LOANS AND ADVANCES Statutory restrictions on the lending powers of banks provided under section 19 to 21 and 35A of Banking Regulation Act 1949 (BR Act). Reserve bank of India (RBI) also has the power to control and issues direction to banks regarding their loans and advances policies. Every year RBI issues some guidelines and restrictions in its master circular on loans and advances Statutory and Other restrictions every year on 1 st July in force till 30 th June next year.
CONTINUED RBI puts regulatory restrictions on banks to be followed during lending loans and advances to officers and relatives of senior officers of bank through these master circular. These regulatory restrictions are compulsory in nature for the bank to follow during lending the loans and advances to officers and relatives of senior officers of bank. SCOPE OF CERTAIN TERMS Term senior officer includes:- Any officer in senior management level in grade IV and above in nationalized bank Any officer of equivalent scale:- (1) in the State Bank of India and associate banks (2) in any banking company incorporated in India. RBI/2014-15/64 master circular no:- DBOD.No.Dir.BC. 16/13.03.00/2014-15 CONTINUED.. Term relative includes the following persons:- Spouse Father Mother (including step-mother) Son (including step-son) Son's Wife Daughter (including step-daughter) Daughter's Husband Brother (including step-brother) Brothers wife Sister (including step-sister) Sisters husband Brother (including step-brother) of the spouse Sister (including step-sister) of the spouse RBI/2014-15/64 master circular no:- DBOD.No.Dir.BC. 16/13.03.00/2014-15
RESTRICTION ACCORDING TO MASTER CIRCULAR OF RBI. Loans and advances given to officers of bank. No officer or committee comprising that officer can use its power to grant loans and advances for himself or its member or to his/her relative. Next higher sanctioning authority has the power to grant the loans and advances. The board of bank should be reported about the loans and advances given to officer. CONTINUED.. Loans and advances given to relatives of senior officers of banks. The proposal of credit facility has to be sanctioned by appropriate authority. The proposal of credit facility when sanctioned by the appropriate authority will be reported to the board of bank. The authority will sanction the credit proposal to relative of senior officer of financial bank in following cases:- To any firm in which the relative holds substantial interest or interest as partner or guarantor. To any company in which the relative holds substantial interest or interest as director or guarantor.
EXEMPTIONS FROM RESTRICTIONS
The restriction will be not applicable on the following credit facilities:- Government securities Life Insurance policies Fixed or other deposits Temporary overdrafts for small amount i.e. up to Rupees twenty five thousand , and Casual purchase of cheques up to Rupees five thousand at a time. housing loans, car advances, consumption loans, etc. granted to an officer of the bank under any scheme applicable generally to officers.