Legal Question in Banking Law in India
Can a Bank show cause its officer for not insisting on collateral and preferring CGTMSE guarantee. What action can be taken against the official flouting RBI directives on loans to SME SSI sector
Asked on 9/21/10, 11:01 am
1 Answer from Attorneys
J. Radhakrishnan
independent Practice
CGTMSE is for the bank's fall back in case of default. It is not a collateral security for the loan. If the officer of the Bank did not insist on collateral and if such a thing is against Bank's internal guidelines or circulars, and if the loan granted turns to be NPA, Bank may issue show cause notice to the officer concerned for flouting its rules.
If a Bank flouts RBI directives on loans, complaint can be made to Banking Ombudsman depending upon the facts of each case.
Answered on 9/25/10, 7:12 pm
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