RBI allows banks to borrow from global lenders

The Reserve Bank of India (RBI) has allowed authorised deal banks to borrow from international or multilateral financial institutions, for a limited period up to 30 November 2013, for general banking requirements.

Such borrowings should, however, not be used for augmentation of capital and would be subject to the conditions stipulated by the RBI.

Moreover, such borrowings will be eligible for the concessional swap facility, RBI said.

As part of the measures to prop up the falling rupee, the RBI set up a swap window for banks last month, offering to exchange foreign currency for rupees at below market rates for lenders that raise funds abroad, in a bid to prop up the rupee by attracting more capital into the country.

The RBI has now allowed banks to borrow from entities other than their own branches overseas under existing regulators for borrowing overseas.

RBI had already allowed authorised dealer banks to borrow funds from their head office, overseas branches and correspondents and avail overdraft in their nostro accounts 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 (excluding borrowings for financing of export credit in foreign currency and capital instruments).

''AD Category-1 banks may borrow funds from their head office, overseas branches and correspondents and avail overdraft in the nostro accounts 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 (excluding borrowings for financing of export credit in foreign currency and capital instruments),'' RBI said in its earlier release.

RBI has now amended the earlier regulations in order to provide greater flexibility to authorised dealer banks in seeking access to overseas funds.