The Reserve Bank of India on Thursday said banks can grant non-fund-based facilities, including Partial Credit Enhancement (PCE), to those customers, who do not avail any fund-based facility from any bank in India, subject to conditions.

The central bank said banks should formulate a comprehensive Board-approved loan policy for grant of non-fund-based facility to such borrowers.

Banks should undertake the same level of credit appraisal as has been laid down for fund-based facilities.

The banks should ensure that the borrower has not availed any fund-based facility from any bank operating in India.

However, at the time of granting non-fund-based facilities, banks have to obtain declaration from the customer about the non-fund-based credit facilities already enjoyed by them from other banks.

So far, banks could open letters of credit (LCs) and purchase / discount / negotiate bills under LCs only in respect of genuine commercial and trade transactions of their borrower constituents who had been sanctioned regular credit facilities by the banks.

Published on January 7, 2016