Non-Fund Based Facilities to Non-Constituent Borrowers: RBI Relaxation and Key Conditions
The Reserve Bank of India (RBI), through circular DBOD.Dir.BC.62/13.07.09/2002-03 dated January 24, 2003, had earlier prohibited banks from extending non-fund based facilities to non-constituent borrowers. This restriction was aimed at preventing frauds, fund diversion, and misuse of one-off transaction-based facilities without proper credit assessment. However, over time, this blanket bar created genuine challenges for borrowers…
