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The Reserve Bank of India (RBI) has upped the threshold up to which a bank can grant personal loans to any director of other banks by 20 times from ₹25 lakh to ₹5 crore.
The upward revision in the threshold is aimed at reflecting the increase in general prices, encourage professionals with the expertise to join the boards, and reduce the cases requiring approval at the board/management committee level without diluting the regulatory intent. The ₹25 lakh threshold was fixed way back in 1996.
However, the RBI said unless sanctioned by the board of Directors/Management Committee, banks cannot grant loans and advances aggregating ₹5 crore and above (hitherto ₹25 lakh and above) to any relative (other than spouse) and dependent children of Chairmen, Managing Directors or other Directors of their own bank as well as other banks.
The central bank said the proposals for credit facilities of an amount less than ₹25 lakh or ₹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.
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