RBI has said that such credit facilities may be sanctioned by the appropriate authority, but the matter should be reported to the board
Reserve Bank of India (RBI) has overhauled rules for extending loans to directors of other banks and relatives of directors. As per the amendments, the central bank has allowed banks to extend personal loans up to ₹5 crore to directors of other banks and directors' relatives other than spouses without board approval. The earlier limit for such loans was ₹25 lakh.
The regulations apply to directors, including the Chairman/Managing Director, of other banks, any firm in which they are interested as a partner or guarantor, or any company in which they hold substantial interest or is interested as a director or as a guarantor.
For relatives of directors, the rules apply to any relative other than spouse and minor children of chairmen, managing directors or other directors of financing banks and other lenders, as well as firms in these relatives are interested as a partner or guarantor.
The threshold has been relaxed to ₹5 crore on in the case of personal loans to directors or their relatives. The earlier limit of ₹25 lakh will continue to apply to business loans.
Personal loans refer to loans given to individuals and consist of consumer credit, education loan, loans given for creation or enhancement of immovable assets like houses, and loans given for investment in financial assets, such as shares, debentures, etc.
"The proposals for credit facilities of an amount less than ₹25 lakh or ₹5 crore (as the case may be) 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," said RBI in a statement on Friday.