RBI/2008-09/448
DBOD.No. BP. BC.127/ 21.04.009/2008-09
April 22, 2009
All Scheduled Commercial
Banks (Excluding RRBs)
Dear Sir,
Extension of Guarantee - Maturity beyond Ten years
In terms of Paragraph 2.1.3 of our Master Circular RBI/2008-09/79 – DBOD.
Dir.BC.18/13.03.00/2008-09 dated July 1, 2008 on ‘Guarantees and Co
-acceptances’, no bank guarantee should normally have a maturity of more than 10
years.
2. We have been receiving requests from banks to enhance the maturity period of
guarantees beyond 10 years. In view of the changed scenario of the banking
industry where banks extend long term loans for periods longer than 10 years for
various projects, it has been decided to allow banks to also issue guarantees
for periods beyond 10 years. However, while issuing such guarantees, banks are
advised to take into account the impact of very long duration guarantees on
their Asset Liability Management. Further, banks may evolve a policy on issuance
of guarantees beyond 10 years as considered appropriate with the approval of
their Board of Directors.
Yours faithfully,
(Prashant Saran)
Chief General Manager-In-Charge.