Banks (including RRBs) are advised to dispense with obtaining ‘No Due Certificate’ from individual borrowers (including SHGs & JLGs) in order to ensure hassle free credit to all borrowers. Earlier similar rule was applicable only for loans up to Rs.50000.00 to small and marginal farmers, share croppers and the like in agriculture advances. The new rule applies to ALL TYPE OF LOAN ACCOUNTS TO INDIVIDUAL BORROWERS IRRESPECTIVE OF LOAN AMOUNT. This rule is also applicable to Government Sponsored Scheme unless the scheme itself provides such a condition for obtention of No due certificate. Further it was clarified by RBI that the service area approach in rural and semi-urban areas continues to be applicable for Government Sponsored Schemes. But the borrower is free to approach any bank branch in his service area for obtaining credit under Government Sponsored scheme.
As an alternative to NO DUE CERTIFICATE, the banking regulator has advocated for other basis of due diligence, as a part of credit appraisal .RBI in its communique dated 28.1.2015, envisages one or more of the following could be included as credit investigation to determine the economic and business environment in which prospective borrower is placed.
- Credit history check through credit information companies
- Self-declaration or an affidavit from the borrower
- CERSAI registration
- Peer monitoring
- Information sharing among lenders
- Information search (writing to other lenders with an auto deadline)
Banks are also advised to submit credit information/data to all Credit Information Companies (CICs), as required in terms of extant instructions issued by RBI.
