Reserve Bank Of India
A. P. (DIR Series) Circular No. 44
October 12, 2012
To,
All Category-I Authorised Dealer banks and Authorised banks
Madam / Sir,
Foreign Exchange Management (Deposit) Regulations, 2000-
Loans to Non Residents / third parties 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 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.66 dated April 28, 2009
in terms of which it was decided to enhance the then 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.
- The Committee to review the facilities for individuals under FEMA, 1999
(Chairperson: Smt. K.J.Udeshi) has recommended that the banks may sanction Rupee
loans in India or foreign currency loans outside India to either the account
holder or a third party to the extent of the balance in the NRE/FCNR (B) account
subject to margin requirements. The existing position in this regard has been
reviewed and it has been decided, in exercise of powers under paragraph 6(d) of
Schedule-1 read with para 9(1) of Schedule-2 of the Foreign Exchange Management
(Deposit) Regulations, 2000, that the banks may now grant loans against NR(E)RA
and FCNR(B) deposits either to the depositors or the third parties as under:-
| |
Existing provision
|
Proposed provision |
| Rupee loans* in India
|
| Loans against NRE/FCNR(B) Fixed Deposits
|
Rs. 100 lakhs ceiling applicable |
Rupee loans to be allowed to depositor/third party without any ceiling subject
to usual margin requirements** |
| Foreign Currency loan* in India/ outside India
|
| Loans against NRE/FCNR(B) Fixed Deposits
|
Rs. 100 lakhs ceiling applicable |
Foreign Currency loans to be allowed to depositor/third party without any
ceiling subject to usual margin requirements ** |
- The term ‘loan’ shall include all types of fund based/non-fund based
facilities.
- In case of FCNR deposits, the margin requirement shall be notionally
calculated on the rupee equivalent of the deposits in accordance with para 9(2)
of Schedule-2 of Foreign Exchange Management (Deposit) Regulations, 2000.
Further, the facility of premature withdrawal of NRE/FCNR deposits shall not be
available where loans against such deposits are to be availed of. This
requirement may specifically be brought to the notice of the deposit holder at
the time of sanction of the loan. The existing loans which are not in conformity
with the above instructions shall continue for their existing term and shall not
be rolled over/renewed. Other conditions as regards grant of loan against
NRE/FCNR deposits shall remain unchanged.
- The above instructions shall come into force with immediate effect. The banks
may bring 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
are without prejudice to permissions/approvals, if any, required under any other
law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager
RBI/2012-13/247