PRUDENTIAL NORMS FOR ISSUANCE OF LETTERS OF COMFORT BY BANKS REGARDING THEIR SUBSIDIARIES

Any Letter of Comfort (LOC) that is assessed to be a contingent liability of the bank by a rating agency / internal or external auditors/ internal inspectors or the RBI inspection team, shall be treated, for all prudential regulatory purposes, on the same footing as a financial guarantee issued by the bank. The banks should disclose full particulars of all the LOCs issued by them during the year, including their assessed financial impact, as also their assessed cumulative financial obligations under the LOCs issued by them in the past and outstanding, in its published financial statements, as part of
the ‘Notes to Accounts’.