Ever wondered why banks refuse certain loans or what rules they follow when approving credit? If you’re preparing for banking exams like JAIIB/CAIIB, working in the banking sector, or just keen to understand RBI’s lending restrictions, this video is for you!
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- Key RBI guidelines on lending restrictions
- MSME loan policies and collateral-free limits
- Large Exposure Framework (LEF) & risk management
- Critical do’s and don’ts for banks while lending
This video is Part 10 of our Advanced Bank Management (ABM) Module C series. If you missed the previous sessions, find all the links in the description. By the end of this video, you’ll have a solid grasp of credit management rules to help you in banking exams and professional banking roles.
📌 Watch the video below and drop your thoughts in the comments!
👉 Before we dive in, watch this video for a complete breakdown:
Key Learnings from the Video
📌 Understanding Credit Restrictions in Banking (00:01:23)
- Banks can’t lend against their own shares
- Loans against another bank’s FDR are prohibited
- Limit on loans to directors increased from ₹25 lakh to ₹5 crore
- Exceptions: Education loans, housing loans, loans against own deposits
📌 Loans to Companies Buying Back Shares (00:03:11)
Banks cannot lend to a company for repurchasing its own shares.
This restriction aligns with RBI’s efforts to prevent stock price manipulation.
📌 Loans to Industries Using Ozone-Depleting Substances (ODS) (00:03:44)
Environmental concern: India follows the Montreal Protocol.
Loans are restricted for companies producing or using ODS like CFCs.
📌 Selective Credit Control (SCC) by RBI
RBI has the authority to impose credit control on specific commodities to prevent hoarding and black marketing.
This helps stabilize essential commodity prices and ensures their fair distribution.
📌 Capital Market Exposure Restrictions
Banks have limited exposure to shares, debentures, and bonds to maintain financial stability.
Recent regulations state that money market mutual fund guidelines now come under SEBI’s purview.
📌 MSME Loan Guidelines & Collateral-Free Limits
The government promotes small businesses by allowing collateral-free loans up to ₹10 lakh under PMEGP.
For well-performing MSMEs, this collateral-free limit extends to ₹25 lakh, fostering growth and expansion.
Conclusion
Understanding credit restrictions, MSME policies, and large exposure limits is crucial for bankers, financial analysts, and banking aspirants. These RBI guidelines ensure financial stability, risk management, and responsible lending.
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💬 What’s your biggest takeaway from this session? Drop your thoughts in the comments!
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