RBI/2008-09/462
A. P. (DIR Series) Circular No.66
April 28, 2009
To,
All Category - I Authorised Dealer banks and Authorised Banks
Madam / Sir,
Foreign Exchange Management (Deposit) Regulations, 2000-
Loans to Non Residents / third party against security of Non Resident (External)
Rupee Accounts
[NR (E) RA / Foreign Currency Non Resident (Bank) Accounts [FCNR(B)] -Deposits
Attention of Authorised Dealer Category - I banks and Authorised banks (the
banks) is invited to Para 6 (a), (b), (c) and (d) of Schedule 1 and Para 9 of
Schedule 2 to Foreign Exchange Management (Deposit) Regulations, 2000 notified
vide Notification No. FEMA 5 / 2000-RB dated May 3, 2000, as amended from time
to time regarding loans against security of funds held in deposit accounts.
Further, attention of the banks is also invited to
A. P. (DIR Series) Circular
No.29 dated January 31, 2007 prohibiting banks from granting fresh loans or
renewing existing loans in excess of Rs.20 lakh against NR(E)RA and FCNR(B)
deposits either to the depositors or third parties. The banks were also advised
not to undertake artificial slicing of the loan amount to circumvent the
ceiling.
- As announced in
Para 111 of the Annual Policy Statement 2009-10, it has been
decided to enhance the existing cap of Rs.20 lakh to Rs.100 lakh on loans
against security of funds held in NR(E)RA and FCNR(B) deposits either to the
depositors or third parties.
- Accordingly, the banks may now grant loans against NR(E)RA and FCNR(B)
deposits either to the depositors or third parties up to a maximum limit of
Rs.100 lakh. The banks are also advised not to undertake artificial slicing of
the loan amount to circumvent the aforesaid ceiling.
- The above instructions shall come into force with immediate effect.
- The banks may bring the contents of this circular to the notice of their
constituents and customers concerned.
- The directions contained in this circular have been issued under sections
10(4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
is without prejudice to permissions/approvals, if any, required under any other
law.
Yours faithfully,
(Salim Gangadharan)
Chief General Manager-in-Charge