PRESENTATION ON LOANS AND

ADVANCES TO OFFICERS AND

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.




Thank you.