Mumbai: Reserve Financial institution these days comfortable norms for banks to Provide sure loans to their CEOs and Administrators via eliminating the earlier approval requirement.
Segment 20 of Banking Law Act, 1949 (B.R. Act, 1949) prohibits banks from granting any mortgage ordevelop to any of its Directors.
But, banks can provide mortgage to Leader Government Officer/ Whole Time Administrators for gettingof vehicle, private laptop, furnishings, constructing/acquiring a house for personal use, competitionstrengthen and credit score limit beneath credit score card facility.
“To be able to streamline the existing tactics and to obviate the want to technique RBI on case-to-casefoundation, it has been determined…business banks can Grant loans and advances to the ChiefGovernment Officer/ Whole Time Directors, with out looking for prior approval of RBI,” the centralFinancial institution stated.
Additionally, the suggestions on ‘Base Fee‘ will no longer be applicable on the interest charged on such loans.
“However, the interest Fee charged on such loans can not be decrease than the Charge charged on loans to the Financial institution‘s personal personnel,” the RBI stated.
Another circumstance is that the loans and advances should shape a part of the repayment/ remuneration policy accepted through the Board of Directors or any committee of the Board to which powers have been delegated or the Appointments Committee, as the case may be.
The RBI in addition said: “Banks need to be aware that in view of the prohibition under Section 20 of the BR Act, 1949, other than the (special) loans…No different loan can be sanctioned to Directors.”
Tale first published on: September sixteen, 2015 19:fifty two (IST)
Tags: RBI, Reserve Bank of India, RBI on loans to Financial institution CEOs