In a circular released on Friday, RBI also said that banks are not allowed to grant loans more than ₹5 crore to any relative other than spouse and dependent children of chairman and managing directors or other directors of their own bank and other banks
Mumbai: The Reserve Bank of India has revised the threshold of personal loan amount that can be granted to board directors and their families at not more than ₹5 crore. Earlier the threshold of personal loan that can be given to any bank director stood at ₹25 lakh.
In a circular released on Friday, RBI also said that banks are not allowed to grant loans more than ₹5 crore to any relative other than spouse and dependent children of chairman and managing directors or other directors of their own bank and other banks. The same applies in the case of any firm in which any of relatives other than spouse and dependent children is a partner, major shareholder or director.
The proposals for credit facilities of an amount less than ₹25 lakh or ₹5 crores to these borrowers may be sanctioned by the appropriate authority in the financing bank under powers vested in such authority, but the matter should be reported to the Board, RBI said.
Personal loans refers to loans given to individuals and consist of consumer credit, education loan, loans given for creation/ enhancement of immovable assets and loans given for investment in financial assets (shares, debentures, etc.).
In the past there have been instances of when the existing directors misused their position to grant loans to favour their family members. Case in point is the ICICI bank MD & CEO Chanda Kochhar who is alleged to have misused her official post to grant ₹3250 crore loan to Videocon. The loan was alleged to be a part of a quid pro quo arrangement under which Venugopal Dhoot invested ₹64 crore in Chanda Kochhar's husband's NuPower Renewables.