RBI releases Regulatory Restrictions on Loans and Advances [Read Circular]

RBI - Loans - Advances - Taxscan

The Reserve Bank of India (RBI) while addressing all Scheduled Commercial Banks (excluding RRBs), all Small Finance Banks, and all Local Area Banks releases the Regulatory Restrictions on Loans and Advances.

The RBI has decided that for personal loans granted to any director of other banks, the threshold of Rs.25 lakhs has been revised to Rs.5 crores.

Unless sanctioned by the Board of Directors/Management Committee, banks should not grant loans and advance aggregating Rs.5 crore and above to any relative other than spouse and minor/dependent children of their own Chairman/Managing Directors or other Directors; any firm in which any of the relatives other than spouse and minor/dependent children are interested as a partner or guarantor; and any company in which any of the relatives other than spouse and minor/dependent children is interested as a major shareholder or as a director or as a guarantor or is in control. Provided that a relative of a director shall also be deemed to be interested in a company, being the subsidiary or holding company, if he/she is a major shareholder or is in control of the respective holding or subsidiary company. This includes directors of Scheduled Co-operative Banks, directors of subsidiaries/trustees of mutual funds/venture capital funds.

“The proposals for credit facilities of an amount less than Rupees twenty-five lakh of Rupees five crores (as the case may be) to these borrowers may be sanctioned by the appropriate authority in the financing bank under powers vested in such authority, but the matter should be reported to the Board,” the Apex Bank notified.

The term “major shareholder” shall mean a person holding 10% or more of the paid-up share capital of five crore rupees in paid-up shares, whichever is less.

The term “control” shall include the right to appoint a majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in another manner.

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