Foreign Currency Loans
in India to holders of FCNR(B) Deposits
AP (DIR Series) (2002-2003) Circular No. 24, dated 25-9-2002
Attention
of authorised dealers is invited to sub-regulation 1(v) of regulation 4
of Reserve Bank Notification No. FEMA. 3/2000-RB dated May 3, 2000 in terms of
which a branch outside India of an authorised dealer is empowered to extend
foreign currency loans against the security of funds held in NRE/FCNR deposit
accounts maintained in accordance with the Foreign Exchange Management
(Deposit) Regulations, 2000.
2. With a view
to extend the above facility in India to the account holders, it has now been
decided to permit authorised dealers to grant foreign currency loans in India
against the security of funds held in FCNR (B) deposit accounts to the account
holders only, subject to the guidelines given in the Annexure. Further,
authorised dealers should also comply with the instructions for grant of loans
against non-resident deposits contained in the Circular DBS.FGV (F)
No.BC.13/23.04.001/2001-02 dated May 21, 2002 issued by the Department of
Banking Supervision, Reserve Bank of India, prescribing inter alia,
precautions to be taken by banks while granting loans against non-resident
deposits.
3. The
Notification to amend the regulations referred to above is being issued
separately.
4. Authorised
Dealers may bring the contents of this circular to the notice of their
constituents concerned.
5. The
directions contained in the circular have been issued under section 10(4) and
section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).
ANNEXURE
Guidelines for grant of foreign currency loans in
India to holders of FCNR (B) Deposits
(a) Loans should be against own FCNR (B)
deposits and not against the deposits of third parties.
(b) Loans should be granted only to the
deposit holder and not to any third party/ies. The documents should be executed
by the deposit holders themselves and not by their Power of Attorney holders.
(c) The maturity of the loan shall not
exceed the maturity of the deposit under any circumstances.
(d) Loans shall be sanctioned to the account
holders for purposes other than investments in India.
(e) Advances shall be fully secured by the
deposit and regulations, if any, relating to margin shall be complied with.
(f) Repayment is to be effected by fresh
remittances in foreign exchange or by adjustment of the deposit.
(g) The bank should put in place adequate
monitoring system for the purpose.
(h) Extension of this facility should have
the approval of the Board of the bank.