The Reserve Bank of India has urged banks to stick to policies approved by their respective Boards while investing in real estate or carrying out transactions related to realty at overseas branches.

It said future transactions relating to purchase or sale of real estate as well as acquiring or letting out property on lease or rent should be in accordance with the Board-approved policy.

Operational norms The directive has come after the central bank learnt of lapses by Indian banks in the purchase/sale of real estate as well as in acquiring/letting out property on lease/rental basis at some overseas locations .

“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; Banking Regulation Act, 1949; and other relevant Indian laws,” according to a RBI circular to banks.

The central bank has said that the policy should require that any agreement for acquiring/letting out premises on rental/lease basis must 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 or location.

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