The Reserve Bank of India (RBI) on Friday said banks without their boards' approval can sanction personal loans up to Rs 5 crore to directors of other banks.
The earlier limit was Rs 25 lakh.
"On a review, it has been decided that... for personal loans granted to any director of other banks, the threshold of Rupees twenty-five lakh... stands revised to Rupees five crore," RBI said in a notification.
Unless sanctioned by the board of directors/ management committee, banks should not grant loans and advances aggregating Rs 5 crore and above to any relative other than spouse and minor/ dependent children of their own Chairmen/ Managing Directors or other directors.
According to the notification, proposals for credit facilities of an amount less than Rs 25 lakh or Rs 5 crore (as the case may be) to such borrowers may be sanctioned by the appropriate authority in the financing bank but the matter should be reported to the board.
In July 2015, restrictions were imposed on loans to directors/ relatives of directors of banks. In addition to statutory restriction on lending to their own directors by banks, RBI had mandated that loans aggregating Rs 25 lakh or above can be sanctioned only with the approval of the board of directors/ management committee.
Currently, sanction by the board/management committee for grant of loans to a company is required, where the relative of a director holds substantial interest which is defined as 10 per cent of paid-up capital or Rs 5 lakh, whichever is less.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU