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RBI No. 2005-06/242
DBOD No. Dir.BC. 51/13.07.05/2005-06
December 27, 2005
The Chairman & Managing Director/ Chief Executive Officer
All Scheduled Commercial Banks (Excluding RRBs)
Dear Sir,
Guidelines for bank finance to employees/ Employee Trusts for
purchasing banks’ own shares
Please refer to our circular DBOD
No. Dir. BC. 63/13.07.05/2004-05 dated December 24, 2004 read with circular
DBOD No. Dir. BC.
67/13.07.05/2003-04 dated February 6, 2004 containing guidelines regarding
bank finance to assist employees to buy shares of their own companies. It has
been, inter alia, stated therein that these instructions will not be applicable
for extending financial assistance by banks to their own employees for acquisition
of shares under ESOP/ IPO.
2. It has come to our notice that some banks have extended
loans to their employees/ Employee Trusts set up by them, for purchasing their
own shares on clean basis. In this regard, it is clarified that banks are not
allowed to extend advances including to their employees/ Employee Trusts set
up by them for the purpose of purchasing their (banks’) own shares under ESOP/
IPO or from the secondary market. This prohibition will apply irrespective of
whether the advances are unsecured or secured.
Yours faithfully,
(Prashant Saran)
Chief General Manager-in-Charge
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