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DBOD.No. Dir.BC.47/13.01.09/98 May 28, 1998 All Commercial Banks Dear Sir, Loans against FCNR (B)
Deposits and Loans out of FCNR(B)/NRNR Pools Please refer to paragraph 17
(g) (iii) of Governor's Circular No. CPC.BC. 165/07.01.279/97-98 dated
October 21, 1997 on the above mentioned subject. In this connection, a
reference is also invited to our Circular DBOD. No. Dir. BC. 133/13.01.09/97
of even date in terms of which it was decided to dispense with multiple
prescriptions on loans and advances against FCNR(B) Deposits and lending out
of resources mobilised under the Scheme. Accordingly, it was further decided
to bring such loans and advances under the provisions of Interest Rate
Directive on advances (c.f. DBOD. No. Dir. BC.123/13.07.01/97-98 dated
October 21, 1997). Some of the banks have represented to us that they had
contracted fixed rate loans in rupees below PLR before the announcement of
change in the credit policy in October 1997 and they will have to
re-negotiate the terms on such loans with the borrowers if the interest rate
changes are effected from October 22, 1997. We wish to clarify that our
aforesaid Directive being prospective in nature, all banks should ensure to
adhere to the rates of interest as stipulated in our Directive in respect of
all loans granted or renewed on or after October 22, 1997 under the various
categories mentioned in our Directive dated October 21, 1997, referred to
above. 2. As regards lending out of
resources mobilised under NRNR Scheme, we have received certain enquiries
from the banks |
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regarding rates of interest
applicable on grant of such loans. We invite attention to the provisions
contained in paragraph 6 of AD (MA Series) Circular No. 35 dated June 4, 1992
issued by the Exchange Control Department as also paragraph X of our
Directive DBOD. No. Dir. BC. 139/13.01.09/92 dated June 11, 1992 stipulating
that banks are free to determine the margin and the rates of interest on
rupee loans/over-drafts granted to deposit holders against the security of
such deposits. This instruction continues to be in force. All other advances
made out of resources mobilised under NRNR scheme will attract the provisions
of our interest rates Directive on advances as issued from time to time. This circular is issued under
Sections 21 and 35A of the Banking Regulation Act, 1949. Yours faithfully (M.P. Kothari) General Manager |
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