RBI allows banks to borrow from global institutions sans nod

The Reserve Bank of India said on Thursday it would allow banks to borrow from multilateral financial institutions for general banking business without seeking the central bank's approval, to make the funding process easier.

RBI had earlier said authorised Category – I foreign exchange dealer banks may borrow funds from their head office or overseas branches or correspondents outside India or any other entity as permitted by Reserve Bank, up to a limit of hundred per cent of their unimpaired Tier I capital at the close of the previous quarter or $10 million (or its equivalent), whichever is higher, subject to such conditions as the RBI may direct.

Also, in October 2013, RBI had granted permission to such banks to borrow from international / multilateral financial institutions for a limited period up to 30 November 2013.

Now, with a view to providing greater flexibility in seeking access to overseas funds, it has 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, the central bank said in a notification.

The international / multilateral financial institutions of which 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.

Such borrowings should be for the purpose of general banking business and not for capital augmentation and will be subject to the applicable prudential conditions, RBI said.