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This circular permits banks to borrow funds, subject to certain conditions, from their Head Office, overseas branches and correspondents and overdrafts in Nostro accounts 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, as against the existing limit of 50% (excluding borrowings for financing of export credit in foreign currency and capital instruments).
Further, banks can up to 30th November, 2013, enter into a swap transaction with the RBI in respect of the borrowings raised as above at a concessional rate of 100 basis points below the market rate for all fresh borrowing with a minimum tenor of one year and a maximum tenor of three years, irrespective of whether such borrowings are in excess of 50% of their unimpaired Tier I capital or not. Although banks are free to borrow in any freely convertible currency, the swap is available only for conversion of US $ equivalent into INR and the US $ equivalent shall be computed at the relevant cross rate prevailing on the date of the swap.
