Scheme of Non-Competitive Bidding Facility in the Auctions o

Scheme of Non-Competitive Bidding Facility in the Auctions of State Development Loans

RBI/2009-10/128
IDMD.No. 954 /08.03.001/2009-10

August 24, 2009

All NDS Members

Dear Sir / Madam,

Scheme of Non-Competitive Bidding Facility in the Auctions of State Development Loans

Please refer to our press release 2009-2010/293 dated August 21, 2009 on the operationalisation of the Scheme of Non-Competitive Bidding Facility in the Auctions of State Development Loans.

2.  The Reserve Bank of India, in consultation with the State Governments, has decided to introduce the Non-Competitive Bidding in the Auction of State Development Loans from August 25, 2009 onwards.

3.  NDS members may submit a single consolidated bid electronically in respect of non-competitive bids on behalf of constituents / non-constituents. However, a complete record of the details of non-competitive bids may be maintained by them and such bids should be subjected to concurrent audit to ensure that the participants under the Scheme comply with the terms and conditions of the Non-competitive Bidding Scheme in the auction of State Government Securities. It may also be ensured that non-competitive bidders submit a single bid only, not exceeding 1 % of the notified amount. If the aggregate amount of bids is more than the reserved amount (10% of notified amount), pro rata allotment would be made. In case of partial allotments, it shall be the responsibility of the bank or the Primary Dealer concerned to appropriately allocate securities to their clients in a transparent manner.

4.  The changes in the auction procedures shall be operational with effect from the auction to be held on August 25, 2009.

Yours faithfully

(K.V. Rajan) 
Chief General Manager

Increase in exemption of collateral security in respect of individual and group loans under SGSY Scheme

RBI/2009-10/127
RPCD.SP.BC.No 12 /09.01.01/2009-10

August 24, 2009

The Chairman /Managing Directors
All Scheduled Commercial Banks
(Excluding RRBs)

Dear Sir/Madam,

Increase in exemption of collateral security in respect of individual and group loans under SGSY Scheme

Please refer to our Circulars No.RPCD.SP.BC23/09.01.01/99 -2000 dated September 1, 1999 and RPCD.SP.BC.113/09.01.01/2002-03 dated July 4, 2002 advising the banks about the exemption of secondary collateral security ( earlier referred to as primary security ) for individual loans upto Rs 50,000/- and group loans up to Rs. 5 lakh under SGSY Scheme respectively.

It has now been decided to raise the exemption limit of secondary collateral security under SGSY to Rs. 1 lakh from the existing Rs. 50,000/- in respect of individual loans and to Rs.10 lakh from the existing Rs.5 lakh in respect of group loans. Accordingly, for individual loans up to Rs.1 lakh and group loans up to Rs. 10 lakh, the assets created out of bank loan would be hypothecated to the bank as primary collateral (earlier referred to as primary security). In case where movable assets are not created as in land based activities such as dug well, minor irrigation, etc., mortgage of land may be obtained. Where mortgage of land is not possible, third party guarantee may be obtained at the discretion of the bank.

For all individual loans exceeding Rs.1lakh and group loans exceeding Rs. 10 lakh, in addition to primary security such as hypothecation/mortgage of land or third party guarantee as the case may be, suitable margin money/ other collateral security in the form of insurance policy; marketable security/ deeds of other property etc. may be obtained at the discretion of the bank. The upper ceiling of Rs.10 lakh in respect of group loans is irrespective of the size of the group or prorata per capita loan to the group.

We advise that we are receiving complaints both from Government of India and certain State Governments that banks are not complying with even the existing norms of exempting individual loans up to Rs.50, 000 and for group loans up to Rs. 5 lakh from taking any secondary collateral. You may kindly consider issuing necessary instructions to your controlling offices/branches to ensure strict compliance with the guidelines.

Please acknowledge receipt.

Yours faithfully,

(Lily Vadera)
General Manager