Policy for Transfer of Borrowal Accounts from One Bank to Another

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RBI/2011-12/551
DBOD.No.BP.BC-104/21.04.048/2011-12

May 10, 2012

The Chairman and Managing Director/
Chief Executive Officer of
All Scheduled Commercial Banks
Dear Sir,
Transfer of Borrowal Accounts from One Bank to Another

Please refer to our circular IECD.No.20/08.12.01/97-98 dated December 2, 1997, in terms of which banks were advised to incorporate the necessary safeguards to be observed in the case of transfer of borrowal accounts from one bank to another as a part of their lending policy/procedures.

2. However, of late we have been receiving references/complaints that critical information on the health of the borrowal accounts being taken over is not being shared by the transferor bank with the transferee bank, resulting in inadequate due diligence at the time of taking over of accounts.

3. Therefore, we advise that:

a) Banks should put in place a Board approved policy with regard to take-over of accounts from another bank. The policy may include norms relating to the nature of the accounts that may be taken over, authority levels for sanction of takeover, reporting of takeover to higher authorities, monitoring mechanism of taken over accounts, credit audit of taken over accounts, examination of staff accountability especially in case of quick mortality of such cases after takeover, periodic review of taken over accounts at Board /Board Committee level, Top Management level, etc.

b) In addition, before taking over an account, the transferee bank should obtain necessary credit information from the transferor bank as per the format prescribed in our circular DBOD.No.BP.BC.94/ 08.12.001/2008-09 dated December 8, 2008 on “Lending under Consortium Arrangement/Multiple Banking Arrangements”. The format is furnished in Annex. This would enable the transferee bank to be fully aware of the irregularities, if any, existing in the borrower’s account(s) with the transferor bank. The transferor bank, on receipt of a request from the transferee bank, should share necessary credit information as per the prescribed format at the earliest