Indian banks permitted to guarantee loans for above 10 years
By Neelima Shankar
Apr 24, 2009
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The Reserve Bank of India (RBI) in a notification displayed on its website states that Indian banks can issue loan guarantees for more than 10 years.

RBI said, "In view of the changed scenario of the banking industry where banks extend long-term loans for periods longer than 10 years for various projects, it has been decided to allow banks to also issue guarantees for periods beyond 10 years."

Earlier RBI allowed banks to guarantee loans for a shorter period of below 10 years while the development financial institutions could guarantee loans for more than 10 years.

The banking regulator has however cautioned that banks should take into account the impact of very long duration guarantees on their asset-liability management.

Further a policy for these guarantees must be taken with the approval of the board of directors of the bank.

RBI had made many other amendments in its annual credit policy that was unveiled on Tuesday April 21st. The regulator has cut the repo and reverse repo rate by 25 basis points each to 4.75% and 3.25% respectively.


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