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RBI allows Loans upto Rs 5 cr. to other Bank’s Directors

Published on July 25, 2021
Current Context: The Reserve Bank of India has raised the loan amount to be granted to the directors of other banks or associates without any approval from the board.
RBI allows Loans upto Rs 5 cr. to other Bank’s Directors
  • This raise in the value is for the first time in 26 years.
  • As per new rules, the RBI has allowed banks to extend personal loans up to Rs 5 crore to any director of other banks, all loans to the relatives of the bank’s own director, relatives of director of other banks, companies or firms linked with them.
  • This is applicable only for personal loans, which include consumer credit, education loans, loans given for the creation or enhancement of immovable assets and given for investing in financial assets.
  • The earlier limit for the same was Rs 25 lakhs.
  • It will be applicable to all scheduled commercial banks, except regional rural banks (RRBs), small finance banks and all local area banks.
  • Henceforth, there will be no need for the banks to get approval from the board of Directors to offer loans above Rs 5 crore to the spouses and minor dependent children of the CMD or other directors of their own bank or other banks.
  • However, the bank will need to get approval from the board of Directors to offer loans above Rs 5 crore to the relatives of the directors, major shareholders of the bank or its partners or guarantor of the bank.
  • The banks are also directed to offer loans that are less than Rs 5 crore without board approval to the directors and their relatives.
  • Static Part: 
    • HQ of RBI: Mumbai
    • Governor of RBI: Shaktikanta Das

Question: 

Q.1 The RBI has raised the limit of the personal loan amount which is granted by lenders to the directors of other banks and their families from Rs 25 lakhs to Rs ___?
a. Rs 50 lakhs
b. Rs 70 lakhs
c. Rs 1 crore
d. Rs 5 crore

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