Ceiling on bank loans against NR(E)RA and FCNR(B) deposits
A sizeable increase in Non-Resident (External) Rupee Account [NR(E)RA] and Foreign Currency Non-Resident (Banks) [FCNR(B)] deposits has been observed in 2006-07 so far. At the same time, there are reports of large growth in advances being granted against such deposits.
Banks maintaining NR(E)RA and FCNR (B) deposits are permitted to grant loans against security of such deposits to the depositors in India and abroad and also to third parties subject to conditions.
Third Quarter Review of Annual Statement on Monetary Policy for the Year 2006-07 on 31st January 2007, has observed that keeping in view the objective of making these facilities available to individual Non-Resident Indians (NRIs) and considering the prevailing monetary conditions, there is merit in avoiding upward pressure on asset prices in sensitive sectors through utilisation of this facility.
Banks are now prohibited from granting fresh loans or renew existing loans in excess of Rupees 20 lakh against the NR(E)RA and FCNR(B) deposits, either to depositors or to third parties, with immediate effect. The banks are also advised not to undertake artificial slicing of the loan amount to circumvent the ceiling.
Click here for NRI's Handbook for Banking & Investments
Click here for more news & stories
|