Banking · Credit Monitoring and Loan Limits
When a bank grants an ad-hoc limit to a borrower beyond the sanctioned limit, what is the regulatory requirement regarding the duration and pricing of such an arrangement?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Banks must convert all ad-hoc limits into permanent term loans within 30 days of the first withdrawal.
- 2Ad-hoc limits are exempt from the Master Circular on Credit Monitoring if the amount is less than 1 Crore.
- 3Ad-hoc limits should generally not exceed three months and should attract a penal interest of at least 2 percent per annum.✓
- 4Ad-hoc limits can be granted for a maximum of one year at the same interest rate as the regular limit.
Correct answer
Ad-hoc limits should generally not exceed three months and should attract a penal interest of at least 2 percent per annum.
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