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October 2013

A. P. (DIR Series) Circular No. 40 dated 10th September, 2013

By Gaurang Gandhi, Chartered Accountant
Reading Time 2 mins
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Notification No.FEMA.286/2013-RB dated 5th September, 2013 notified vide G.S.R.No.595 (E) dated 6th September, 2013 Overseas Foreign Currency Borrowings by Authorised Dealer Banks– Enhancement of limit

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.

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A. P. (DIR Series) Circular No. 41 dated 10th September, 2013