Banks can give loan guarantees for over 10 yrs

23 Apr 2009, REUTERS

MUMBAI: Banks can now issue loan guarantees for more than 10 years, the central bank said in a notification posted on its website. Earlier, the Reserve Bank of India allowed banks to guarantee shorter maturities below 10 years, while development financial institutions could guarantee loans for more than 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," the RBI said.

But the central bank cautioned that banks must take into account the impact of very long duration guarantees on their asset-liability management and a policy for these guarantees must be taken with the approval of the bank's board of directors.