| Date: |
10-09-2013
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| Notification No: |
RBI/2013-14/240 A.P. (DIR Series) Circular No. 40
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| Issuing Authority: |
RBI
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| Type: |
A.P.D.(Series) Circulars
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| File No: |
RBI/2013-14/240 |
| Subject: |
Overseas Foreign Currency Borrowings by Authorised Dealer Banks – Enhancement of limit
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RBI/2013-14/240
A.P. (DIR Series) Circular No. 40
September 10, 2013
To
All Category - I Authorised Dealer Banks
Madam/ Sir,
Overseas Foreign Currency Borrowings by Authorised Dealer Banks – Enhancement of
limit
Attention of Authorised Dealer Category - I (AD Category – I) banks is invited
to
A. P. (DIR Series) Circular No. 23 dated October 15, 2008, in terms of which:
- all categories of overseas foreign currency borrowings including existing
ECBs, loans and overdrafts from their Head Office, overseas branches and
correspondents and overdrafts in Nostro accounts (not adjusted within five days)
shall not exceed 50 per cent of their unimpaired Tier I capital as at the close
of the previous quarter or USD 10 million (or its equivalent), whichever is
higher, and
- overseas borrowings by AD Category – I banks for the purpose of financing
export credit in foreign currency, subordinated debt placed by head offices of
foreign banks with their branches in India as Tier II capital, capital funds
raised/augmented by the issue of innovative perpetual debt instruments and debt
capital instruments in foreign currency and any other overseas borrowings with
the specific approval of the Reserve Bank would be outside this limit.
-
With a view to providing greater flexibility to AD Category - I banks in
seeking access to overseas funds, it has been decided to liberalise this
facility further. Accordingly, AD Category - I banks may henceforth borrow funds
from their Head Office, overseas branches and correspondents and overdrafts in
nostro accounts up to a limit of 100 per cent of their unimpaired Tier I capital
as at the close of the previous quarter or USD 10 million (or its equivalent),
whichever is higher, as against the existing limit of 50 per cent (excluding
borrowings for financing of export credit in foreign currency and capital
instruments).
- In view of the prevailing market conditions, it has further been decided that
AD Category I banks, at their option, can enter into a swap transaction with RBI
in respect of the borrowings raised after the date of this circular. The swaps
shall be available at a concessional rate of a hundred basis points below the
market rate for all fresh borrowing with a minimum tenor of one year and a
maximum tenor of three years, irrespective of whether such borrowings are in
excess of fifty per cent of their unimpaired Tier I capital or not. Further,
while the swaps shall be for the entire tenor of the borrowing, the rate shall
be reset after every one year from the date of the swap at hundred basis points
lower than the market rate prevailing on the date of reset. While the banks are
free to borrow in any freely convertible currency, the swap will be available
only for conversion of USD equivalent into Rupees and the USD equivalent shall
be computed at the relevant cross rate prevailing on the date of the swap.
Category I AD banks may contact the Principal Chief General Manager, Financial
Markets Department, Reserve Bank of India, Central Office for availing of the
swap facility. The concessional swap window shall be open till November 30,
2013. It may be noted that RBI reserves the right to decline a swap transaction
or to withdraw this facility before November 30, 2013 after due notice. All
other instructions contained in
A. P. (DIR Series) Circular No.81 dated March
24, 2004 remain unchanged.
- Further, the borrowings beyond the hitherto permitted level of 50 per cent of
their unimpaired Tier I capital will have to subject to the following
conditions:
- The bank should have a Board approved policy on overseas borrowings which
shall contain the risk management practices that the bank would adhere to while
borrowing abroad in foreign currency;
- The bank should maintain a CRAR of 12.0 per cent.
- The borrowings beyond the existing ceiling shall be with a minimum
maturity of three years.
- All other existing norms (FEMA regulations, NOPL norms etc.) shall continue
to be applicable.
- AD Category – I banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
- Reserve Bank of India has since amended the relevant Regulations vide
Notification No. FEMA. 286/2013-RB dated September 05, 2013, notified vide
G.S.R.No.595(E) dated September 06, 2013.
- 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,
(C.D. Srinivasan)
Chief General Manager
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