The interest rate levied will be at the cash credit rate applicable to the borrower. The bank will obtain first or second charge on the assets to be acquired as appropriate, in addition to the personal or corporate guarantee of the promoters.

The end use of bridge finance is closely monitored on the same lines as in the case of term loans. The progress in capital expenditure will be monitored through the statements certified by companies' auditors. A lien on a company's public issue amounts is marked prior to disbursements.

The Reserve Bank of India had permitted banks to sanction bridge loans and interim finance to companies against commitment made by a financial institution and/or another bank and against issue of equity, respectively.

While banks were allowed within the 5 per cent ceiling of incremental depositsprescribed for banks' investments in shares, bridge finance was not restricted within any limit for financial institutions.

Banks were also advised by the RBI to exercise adequate safeguards by giving due attention to security aspects by formulating suitable guidelines for the sanction of bridge loans with the approval of their boards.

The central bank had allowed individual banks to decide the type of security that they may take to secure such advances.