RBI allows loan upto Rs. 5 crore to other banks’ directors without board approval

The Reserve Bank of India (RBI) has changed the conditions for granting loans to directors of rival banks and their relatives. The central bank has amended its regulations to allow banks to provide personal loans of up to 5 crore to directors of rival banks and their family other than spouses without board permission. The previous ceiling for such loans was Rs. 25 lakh.

The rules apply to other banks’ directors, including the Chairman/Managing Director, any firm in which they have a partner or guarantor interest, and any company in which they have a substantial stake or are a director or guarantor. The regulations apply to relatives of directors who are not spouses or minor children of chairmen, managing directors, or other directors of financing banks and other lenders, as well as enterprises in which these relatives are partners or guarantors.

In the case of personal loans to directors or their relatives, the limit has been lowered to $5 crore. For business loans, the previous cap of $25 lakh will remain in effect. Consumer credit, school loans, loans for the building or upgrading of immovable properties such as houses, and loans for investment in financial assets such as shares, debentures, and other types of loans are all examples of personal loans.”Proposals for credit facilities of less than Rs. 25 lakh or Rs. 5 crore (as the case may be) to these borrowers may be sanctioned by the competent authority in the financing bank under powers granted in such authority,” RBI said in a statement on Friday.

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