RBI/2006-2007/338
A. P. (DIR Series) Circular No. 42
April 23, 2007
To,
All Category - I Authorised Dealer Banks
Madam / Sir,
Overseas Foreign Currency Borrowings by Authorised Dealer Banks
- Attention of Authorised Dealer Category - I (AD Category - I) banks is invited
to the announcement made on October 31, 2006, in the Mid Term Review of the
Annual Policy for the year 2006-07 regarding overseas foreign currency
borrowings by Authorised Dealer Banks (para 97 - annexed).
- In view of the prevailing market conditions and the likely impact on
liquidity, it has been decided to keep the operationalisation of the policy
announcement in abeyance.
Yours faithfully,
(Salim Gangadharan)
Chief General Manager
Annex
Para 97 of the Mid-Term Review of the Annual Policy for the year 2006-07
Banks Borrowings from Overseas: Enhancement
With a view to providing further flexibility to authorised dealer banks in
seeking access to funds overseas, the following liberalisation is proposed:
authorised dealer banks may henceforth borrow funds from their overseas
branches and correspondent banks (including borrowings for financing export
credit, ECBs and overdrafts from their Head Office/Nostro account) up to a limit
of 50 per cent of their unimpaired Tier I capital or US $ 10 million, whichever
is higher, as against the earlier overall limit of 25 per cent (excluding
borrowings for financing export credit). Short-term borrowings up to a period of
one year or less, however, should not exceed 20 per cent of unimpaired Tier I
capital within the overall limit of 50 per cent;
all borrowings in the form of subordinated debt placed by head offices of
foreign banks with their branches in India as Tier II capital, capital funds
raised/augmented by issue of innovative perpetual debt instruments (IPDI) and
other overseas borrowing with the specific approval of the Reserve Bank
would, however, continue to be outside the limit of 50 per cent; and
in order to phase in these limits in a non-disruptive manner, banks whose
overseas borrowings exceed the revised prudential limit may approach the Reserve
Bank with a proposed road-map for complying with these limits.