NEW DELHI: The Reserve Bank of India (RBI) has raised the threshold up to which a bank can grant personal loans to any director of other banks and their families without board approval by 20 times to Rs 5 crore.
In a circular released on Friday, the central bank said that the upward revision is aimed at reflecting the increase in general prices, encouraging professionals with the expertise to join the boards, and reducing the cases requiring approval at the board/management committee level without diluting the regulatory intent.
The earlier limit of Rs 25 lakh was fixed way back in 1996. The revision in threshold will be applicable to only personal loans disbursed to directors of other banks, all loans to relatives of bank’s own directors, relatives of directors of other banks, and the companies or firms associated with them. For business loans, the limit of Rs 25 lakh will continue to apply for directors of other banks, the regulator said.
The proposals for credit facilities of an amount less than Rs 25 lakh or Rs 5 crore 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. The banking regulator has also relaxed the rules for grant of loans to companies where relatives of bankers are directors.