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Foreign Currency Loans in India to Holders of FCNR (B) Deposits
A.P. (DIR Series) Circular No. 24 dated 25th
September 2002
Attention of authorised dealers is invited to
sub-regulation 1(v) of regulation 4 of Reserve Bank Notification No. FEMA. 3/
2000 - RB dated May 3, 2000 in terms of which a branch outside India of an
authorised dealer is empowered to extend foreign currency loans against the
security of funds held in NRE/ FCNR deposit accounts maintained in accordance
with the Foreign Exchange Management (Deposit) Regulations, 2000.
2.
With a view to extend the above facility in India to the account holders,
it has now been decided to permit authorised dealers to grant foreign currency
loans in India against the security of funds held in FCNR (B) deposit accounts
to the account holders only, subject to the guidelines given in the Annexure.
Further, authorised dealers should also comply with the instructions for grant
of loans against non-resident deposits contained in the Circular DBS. FGV (F)
No.BC.13/ 23.04.001/ 2001-02 dated May 21, 2002 issued by the Department of
Banking Supervision, Reserve Bank of India, prescribing inter alia,
precautions to be taken by banks while granting loans against nonresident
deposits.
3.
The Notification to amend the regulations referred to above is being
issued separately.
4.
Authorised Dealers may bring the contents of this circular to the notice
of their constituents concerned.
5.
The directions contained in the circular have been issued under Section
10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of
1999).
ANNEXURE
GUIDELINES
FOR GRANT OF FOREIGN CURRENCY LOANS IN INDIA TO HOLDERS OF FCNR (B) DEPOSITS
[A.P. (DIR Series) Circular No.24 dated
25.9.2002]
(a)
Loans should be against own FCNR (B) deposits and not against the
deposits of third parties.
(b)
Loans should be granted only to the deposit holder and not to any third
party/ ies.
The documents should
be executed by the deposit holders themselves and not by their Power of Attorney
holders.
(c)
The maturity of the loan shall not exceed the maturity of the deposit
under any circumstances.
(d)
Loans shall be sanctioned to the account holders for purposes other than
investments in India.
(e)
Advances shall be fully secured by the deposit and regulations, if any,
relating to margin shall be complied with.
(f)
Repayment is to be effected by fresh remittances in foreign exchange or
by adjustment of the deposit.
(g)
The bank should put in place adequate monitoring system for the purpose.
(h) Extension of
this facility should have the approval of the Board of the bank.
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