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Reuters

RBI allows banks to borrow from global institutions without approval

26 June, 2015

RBI eased its funding norms allowing banks to borrow from international financial institutions for general banking business without seeking permission.

“With a view to providing greater flexibility in seeking access to overseas funds, it has now been decided to permit AD Category – I banks to borrow from international/multilateral financial institutions without approaching Reserve Bank for a case by case approval,” RBI said. 

Though the bank has allowed banks to borrow from foreign institutions, it said banks could only borrow from international or multilateral financial institutions of which the government of India is a shareholding member or which have been established by more than one government or have shareholding by more than one government and other international organisations.

The central bank, in its notification, highlighted that banks could borrow only up to a limit of 100 per cent of their unimpaired Tier I capital as at the close of the previous quarter or $10 million (or its equivalent), whichever is higher, subject to such conditions as RBI may direct.

“Such borrowings should be for the purpose of general banking business and not for capital augmentation,” the central bank added. 

RBI issued another circular, allowing non-deposit taking NBFCs to act as sub-agents under Money Transfer Service Schemes (MTSS) without seeking prior approval from it, changing its stance from a circular issued in August last year specifying that NBFCs required prior approval.

Deposit accepting NBFCs are not permitted to undertake such activity. 

The central bank has been making efforts to boost the credit channels in the country as data released on Wednesday showed credit growth in single-digit figures for a sixth straight month. Financial Stability Report issued by the bank on Thursday highlighted the bad debt problem while also pointing that credit growth may not improve for the coming few quarters.  

The bank has not been able to successfully turn around the credit condition despite the three rate cuts as tepid demand, slow growth in the corporate sector and banks’ reluctance to lower rates have constrained its efforts.


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1 Comment
Dr Jagdish Joshipura . 2 years ago

There is a need to form High level committee by RBI to look into problems in public sector banks relating to huge NPAs and low credit growth.They should not be given fresh capital unless they perform.One can see that prolong vacancy of CMD in PNB could result in sever downfall in its working

RBI allows banks to borrow from global institutions without approval

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