The Reserve Bank of India (RBI) has announced that for personal loans to any director of other banks, the threshold of Rs25 lakh is revised to Rs5cr. The central bank announced a series of regulatory restrictions on loans and advances.
According to RBI, unless sanctioned by the board / management committee, banks should not give loans and advances totaling Rs5cr and more to:
(a) any parent other than the spouse and minor / dependent children of their own Presidents / Managing Directors or other Directors;
(b) any parent other than the spouse and minor / dependent children of the Chairman / Chief Executive Officer or other directors of other banks *;
(c) any business in which one of the family members other than the spouse and the minor / dependent children mentioned in points (a) and (b) above is interested as a partner or guarantor; and
(d) any company in which one of the family members other than the spouse and the minor / dependent children mentioned in points (a) and (b) above is interested as a principal shareholder or as a as administrator or as guarantor or exercises control.
The term “principal shareholder” means a person holding 10% or more of the paid-up share capital or five crore rupees in paid-up shares, whichever is less.
The term “control” includes the right to appoint the majority of directors or to control the management or political decisions that may be exercised by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their rights of management. shareholding or management or shareholders’ or voting pacts or otherwise.
In addition, RBI stated that proposals for credit facilities in an amount less than Rs25 lakh or Rs5cr (as the case may be) to such borrowers may be sanctioned by the appropriate authority of the financing bank under the powers given to this authority, but the matter should be reported to the Board.