Section 7: Not to avail or provide loans in an unauthorised manner

While availing or providing loans from a bank or financial institution, no one shall commit the following acts:

(a) Avail or provide loans by submitting a false, fake or unreal financial statement or by creating an artificial business.

(b) Avail or provide excess loans by way of unnatural overvaluation of collateral security.

(c) Avail or provide loans by way of unnaturally hiking the project cost based on false details.

(d) Avail or provide credit, facility or discounts beyond the authority obtained or limit sanctioned.

¹(d1) Avail credit or advance facilities by the Chief Executive Officer or employees of the bank or financial institution other than the loan or facilities provided according to a prevailing employee by rule from his/her bank or financial institution.

¹(d2) Avail credit by promoter, director, shareholder deemed to have financial interest pursuant to prevailing laws or his/her family member from his/her bank or financial institution.

Provided that restriction shall not be made to avail credit against the security of fixed deposit receipt, gold or government securities.

²(e) Re-avail or re-provide loans from or by another Bank or Financial Institution without having a due release of the collateral security once provided to a Bank or Financial Institution.

Provided that, this restriction shall not be applicable in case of release of loans to be provided under consortium lending under the paripassu agreement up to the value covered by the collateral.

²(f) Avail loans through an entity having established in the name of a person who does not have the financial capability to run the business or who is a person under undue influence or establish a business in the name of such person or provide credit in the name of the person by creating false burrower or extend or obtain loans knowing the said facts.

(g) Extend credit more than the requirement compared to the customer’s business transaction.

(h) Accept or provide any sort of undue benefit in return for granting credit facility.

¹(i) Obtain full or partial credit facilities by the promoter, director, chief executive officer or person responsible for sanctioning credit of bank or financial institution by approving credit in the name of a false customer with the intent of utilising credit facilities.

¹(j) Supply credit facilities in the name of a person or institution with the financial interest of the promoter, director, chief executive officer or person responsible for sanctioning credit.

^{1 Added by the First Amendment.}

^{2 Amended by the First Amendment.}