Presentation on advances to agents/intermediaries based on consideration of deposit mobilisation

1. SHALINI SINGH
LL.M (BANKING & FINANCE)

2.  Section 20 of Banking Regulation Act 1949 deals
with restriction on loans and advances.
 RBI issues the statutory and other regulations that
bank have to follow while issuing loans and
advances.
 These regulations meant for all the scheduled
commercial banks, excluding regional rural banks.
 These regulations are announce by means of a master
circular that is issued every year.

3.  These guidelines are issued by RBI in exercise
of powers conferred by the Banking
Regulation Act, 1949.
 Bank should implement these instructions and
adopt adequate safeguards.
 The purpose is to ensure that the banking
activities undertaken by them are run on
sound, prudent and profitable lines.

4.  The Guidelines are generally issued under the
following categories-
1. Statutory Restrictions
2. Regulatory Restrictions
3. Restrictions on other loans and advances
4. Guidelines for fair practices code for Lenders
5. Guidelines on recovery Agents engaged by
Banks.

5. What are Agents/Intermediaries-
An intermediary is a third party that offers
intermediation services between two trading parties.
FUNCTIONS-Intermediaries
make it possible for a company to
deliver its products to the end user without needing to
own the whole supply chain

6.  Deposit mobilisation is one of the crucial functions of
a Financial Institutions or Banks.
 Banks mobilise deposits as their primary source of
funds.
 In many cases, deposit mobilisation strategy relies
heavily to the banks’ asset and liability management
policy.
 Deposits are the primary source of funds for a bank,
which facilitates the uses of funds (loans and
investments).
 Continuous and adequate deposit mobilisation would
ensure the bank shall be able to sustain its business of
lending and investing.

7.  Banks are restricted to be a party to unethical
practices of raising money through agents or
intermediaries, to meet the need of borrowers.
 These borrowers may not actually require the funds
or the funds might to routed for illegal operations.

8.  Banks should desist from being party to
unethical practices of raising of resources
through agents/intermediaries to meet the
credit needs of the existing/prospective
borrowers or from granting loans to
intermediaries, based on the consideration of
deposit mobilisation, who may not require the
funds for their genuine business requirements.

9.  THANK YOU