State
Bank is in the process of formulating instructions/guidelines
for consumer financing to encourage and facilitate banks to
take exposure in the subject area with prudent banking practices.
Apart from the guidelines being developed by the Sate Bank,
the banks are also required to take steps for strengthening
their credit risk management processes to protect them from
adverse conditions associated with imprudent lending practices.
2.
Meanwhile, in order to facilitate consumer finances
allowed primarily against hypothecation of goods, it has been
decided that the following conditions shall not be applicable
with regard to hypothecation against credit card advances,
financing to purchase consumer durables and personal loans:
3.
The waiver of above formalities on consumer hypothecation
may be allowed by the lending banks only after fulfillment
of other necessary requirements to their satisfaction as laid
down in their
credit policy/manual. This should be viewed as a facilitating
step towards broadening the base of consumer financing, while
ensuring at the same time strict adherence to prudent credit
risk evaluation practices.
4. All other instructions on the
subject shall, however, remain unchanged.
5.
Please acknowledge receipt.
|