BP.BC. 56 /21.04.048/2001-02

January 9, 2002

All commercial banks (excluding RRBs) and notified All India Financial Institutions

Dear Sirs,

Guidelines for Investments by banks/FIs

Please refer to our circular DBOD.No.BC.CIS.47/20:16:002/94 dated April 23, 1994, read with circular DBOD.No. BC.DL.161/20.16.002/99-2000 dated April 1, 2000, in terms of which banks and notified Financial Institutions are required to report to RBI, at prescribed periodicity, the particulars of borrowers with outstanding aggregating Rs.1 crore and above (both funded and non funded) classified as doubtful or loss and borrowers against whom suits have been filed. Besides, banks and FIs are required to report cases of wilful default of Rs.25 lakh and above on a quarterly basis in terms of our circular DBOD.No. BC.DL(W)12/20.16.002(1)/98-99 dated February 20, 1999. RBI circulates the above information to banks and FIs for their confidential use. It also publishes a list of suit filed accounts of Rs.1 crore and above and cases of wilful default of Rs.25 lakh and above, against whom suits have been filed.

2. It has been observed that some of the banks/FIs have not exercised due precaution by reference to the abovementioned lists of defaulters while investing in bonds, debentures, etc. of companies. Banks/FIs are, therefore, advised to exercise due caution while taking any investment decision to subscribe to debentures, bonds, shares etc. and refer to the 'Defaulters Lists' to ensure that investments are not made in companies/entities who are defaulters to the banks and FIs.

Yours faithfully,

( M.R. Srinivasan )
Chief General Manager-in-Charge