1. Definitions
In this
Policy, unless
the context
otherwise requires,
the terms
herein shall
bear the
meanings assigned to
them below
—
Advance against own deposit means advance granted
against Rupee
term deposit and deposit stands
in the name of the borrower
either singly
or jointly, one of the
partners of a partnership firm and advance is made to the
said firm, the proprietor of a
proprietary concern and advance is made to such
concern, a ward whose guardian is competent to borrow on behalf of the
ward and where the advance is made to
the guardian of the ward in such
capacity.
(a) Fixed rate loan means a loan on
which the interest rate is fixed for the entire tenor of the loan.
(b) Floating rate
loan means
a loan
on which
interest rate
does not
remain fixed
during the
tenor of
the loan
(c) Rests refers
to periodicity
of charging interest to
borrowers.
(d) Term loan
means a
loan which
is repayable after a
specified term
period.
(e) All other expressions unless
defined herein shall have the same meaning as have been assigned to them under
the Banking Regulation Act or the Reserve Bank of India Act, or any statutory
modification or re-enactment thereto or as used in commercial parlance, as the
case may be
2. Interest Rate
framework
(i) There shall be a comprehensive policy on interest rates on
advances duly approved by the Board of
Directors
(ii) Bank shall have the freedom to
offer all categories of advances on fixed or floating interest rates.
(iii) Interest shall
be charged
on all
advances at
monthly rests.Provided
that interest on agricultural advances and advance to farmers shall
be charged as per the instructions contained in circulars RPCD. No. CPFS.
BC. 60
/PS. 165-85
dated June
06, 1985
and RPCD.
No. PLFS.
BC. 129 /05.02.27/97-98
dated June
29, 1998.
(iv) Interest chargeable on rupee advances shall be rounded off to the
nearest rupee.
(v) Interest charged on small value
loans, particularly, personal loans and such other loans of similar nature shall
be justifiable having regard to the total cost incurred by the bank in extending
the loan and the extent of return that could be reasonably expected from the
transaction.
(vi) In case of takeover of PACS
from one branch to another branch, transfer of borrowal accounts of the existing
branch to the branch of acquiring bank shall be on mutually agreed terms of
contract.
3. Penal Interest
The Board approved policy will provide for
charging penal interest
on advances which shall be fair
and transparent. The rate of penal
interest shall be decided after taking
into account incentive to service the debt and due regard to
genuine difficulties
of customers.
4.
Interest Rate on Loans
The Policy provides for delegating powers to the Managing Director to approve
rates on loans schemes in consonance with the cost of funds, cost of borrowings,
Operating Costs, market competition and liquidity of loan.Banks shall review
the Interest Rate at least once in a quarter with Asset Liability Management
Committees (ALCOs) as per the
bank’s practice.
5. Exemptions
The following types of loans shall be exempted from the provisions contained
under chapter
III and IV of
this directive:
(a) Loans covered by schemes specially formulated by Government of
India wherein banks
have to
charge interest
rates as per
the scheme.
(b) Loans granted under various refinance schemes formulated by
Government of India or any Government
Undertakings wherein banks charge interest at the rates
prescribed under the schemes to the extent refinance is available,
Interest rate charged
on the part not
covered under
refinance shall
adhere to
the rates decided by the Management
(c) The following
categories of
loans:
(i) Advances to banks’
depositors against their
own deposits.
(ii) Advances to banks’
own employees
including retired
employees.
(iii) Advances granted to
the Chief
Executive Officer
/ Whole
Time Directors.
(iv) Fixed rate
loans.
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