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January 2014

A. P. (DIR Series) Circular No. 77 dated November 22, 2013

By Gaurang Gandhi, Chartered Accountant
Reading Time 2 mins
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Overseas Foreign Currency Borrowings by Authorised Dealer Banks

Presently, banks can borrow funds from international/ multilateral financial institutions up to a limit of 100% 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) for the purpose of general banking business (but not for capital augmentation) and also swap the same at a concessional rate with RBI. This facility is available up to 30th November, 2013.

This circular provides that where any bank is being sanctioned any loan from any international/ multilateral financial institutions and is receiving a firm commitment in this regard on or before 30th November, 2013, it will be allowed to enter into a forward-forward swap under the first leg of which the bank can sell forward the contracted amount of foreign currency corresponding to the loan amount for delivery up to 31st December, 2013. However, if the bank is not able to deliver the contracted amount of foreign currency on the contracted date, it will have to pay the difference between concessional swap rate contracted and the market swap rate plus one hundred basis points.

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