The Reserve Bank of India on Thursday said banks should ensure that all future transactions relating to purchase/sale of real estate as well as acquiring /letting out property on lease/rental basis at overseas centres are undertaken in accordance with the board-approved policy.

This directive has been issued after it came to the central bank’s notice that some Indian banks have committed certain lapses in purchase/sale of real estate as well as in acquiring/ letting out property on lease/rental basis abroad.

“In order to avoid such lapses in future it is advised that boards of directors of banks should lay down policies and formulate detailed operational guidelines to protect the interest of their respective banks.

“The policy/guidelines should be compliant with the provisions of the Foreign Exchange Management Act, 1999, the Banking Regulation Act, 1949, and other relevant Indian laws,” said a RBI circular to banks.

“The policy should, inter alia, require the agreements for acquiring /letting out premises on rental/lease basis to incorporate a suitable exit clause.”

While undertaking transactions in the nature of sale and purchase of property and acquiring/letting out property on lease/rental basis at overseas centres, banks should also ensure that they comply with all the applicable laws of the host country /city or locality.

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