What changed
RBI has imposed a Rs 20 lakh ceiling on loans against NR(E)RA and FCNR(B) deposits, applicable to both depositors and third parties. Banks are also barred from artificially splitting loan amounts to bypass this limit. This supersedes earlier provisions that allowed such loans without a specific cap.
What it means for you
Banks must immediately stop sanctioning or renewing any loan above Rs 20 lakh secured by NRE or FCNR deposits. This move aims to curb potential speculative use of these funds in sensitive asset sectors. Lenders need to review existing loan portfolios and ensure no fresh disbursements exceed the cap.
What you must do
- Immediately halt all fresh loans and renewals exceeding Rs 20 lakh against NR(E)RA or FCNR(B) deposits.
- Review existing loan accounts to ensure no renewal or top-up breaches the Rs 20 lakh ceiling.
- Implement internal controls to prevent artificial splitting of loan amounts to circumvent the limit.
- Communicate this restriction to all relevant branches and relationship managers handling NRI deposits.
Who it affects
AD Category-I banks, Authorised banks handling NRE/FCNR deposits, NRI depositors seeking loans against their NRE/FCNR accounts, Third parties receiving loans secured by NRE/FCNR deposits
Does this cap apply to existing loans that were already above Rs 20 lakh?
The circular prohibits renewing existing loans in excess of Rs 20 lakh. Existing loans above this limit cannot be renewed, but the circular does not explicitly require immediate recall of outstanding loans.
Can a depositor take multiple loans each below Rs 20 lakh from different banks?
No, banks are advised not to artificially slice the loan amount to circumvent the ceiling. The intent is to cap total loan exposure per depositor or third party against such deposits.
What is the rationale behind this Rs 20 lakh limit?
RBI cited the need to avoid upward pressure on asset prices in sensitive sectors and to align with prevailing monetary conditions, while still making loan facilities available to individual NRIs.