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JC - Legal Updates - Loans and Advances – Regulatory Restrictions

Legal Updates

23 Jul 2021

Loans and Advances – Regulatory Restrictions

The Reserve Bank of India has, vide its notification titled ‘Loans and Advances – Regulatory Restrictions’ dated 23rd July 2021 (the “Notification”) amended certain paragraphs under the section on ‘Regulatory Restrictions’ in the Master Circular - Loans and Advances - Statutory and Other Restrictions dated 1st July 2015.

The key amendments under the Notification are as follows:

1) The threshold for personal loans granted to any directors of other banks, has been revised to INR 50,000,000/- (Indian Rupees Fifty Million only) from the existing threshold of INR 2,500,000/- (Indian Rupees Two Million Five Hundred Thousand only);

2) Banks are now bound to obtain necessary approvals from the ‘Board of Directors / Management Committee’, for the purpose of granting loans and advances aggregating to INR 50,000,000/- (Indian Rupees Fifty Million only) and above to the following:

(a) any relative other than spouse and minor / dependent children of their own Chairmen / Managing Directors or other Directors;

(b) any relative other than spouse and minor / dependent children of the Chairman / Managing Director or other directors of other banks;

(c) any firm in which any of the relatives other than spouse and minor / dependent children as mentioned in (a) & (b) above is interested as a partner or guarantor; and

(d) any company in which any of the relatives other than spouse and minor / dependent children as mentioned in (a) & (b) above is interested as a major shareholder or as a director or as a guarantor or is in control.

3) The proposals for credit facilities of an amount less than INR 2,500,000/- (Indian Rupees Two Million Five Hundred Thousand only) or INR 50,000,000/- (Indian Rupees Fifty Million only) (as the case may be) to specified borrowers may be sanctioned by the appropriate authority in the financing bank; however the matter should be reported to the Board of Directors.

Reserve Bank of India - Notifications (rbi.org.in)

For any further information, please contact Mr. Ankit Sinha (ankit.sinha@jclex.com) or Mr. Saurabh Sharma (saurabh.sharma@jclex.com).