RBI's own words: “Attention of Authorised Dealer Category - I (AD Category – I) banks is invited to A. P. (DIR Series) Circular No. 23 dated October 15, 2008” — RBI/2013-14/240
Source: Reserve Bank of India · RBI/2008-09/227 · issued 15 Oct 2008 · ~1 min read
Quick answerRBI has raised the overseas borrowing limit for AD Category-I banks from 25% to 50% of unimpaired Tier I capital, or USD 10 million (whichever is higher), effective immediately. This gives banks more flexibility to access foreign funds.
The rule, in the simplest words
AD Category‑I banks can now borrow up to 50 % of their unimpaired Tier I capital (or USD 10 million, whichever is higher) from overseas sources.
This limit covers all foreign‑currency loans, overdrafts from the head office, overseas branches, correspondents, and Nostro overdrafts that aren’t cleared within five days.
Borrowings that fund export credit in foreign currency or special capital instruments are still outside this limit.
Banks must revise internal policies, compare current overseas borrowings with the new 50 % cap, and monitor their Tier I capital ratios closely.
All other rules from the 2004 circular remain unchanged and banks must still comply with FEMA regulations.
How it plays out — a real example
Rohit, the treasury manager at CityBank in Mumbai, checks the bank’s overseas borrowing schedule each morning. After the RBI change, he calculates that the bank’s unimpaired Tier I capital is ₹20 billion, so the new ceiling is the higher of 50 % (₹10 billion) or USD 10 million. Seeing that the bank’s current overseas loans total ₹6 billion, Rohit updates the treasury policy to allow further borrowing up to the remaining ₹4 billion and informs the risk team about the higher limit.
What changed
The cap on overseas foreign currency borrowings (including loans, overdrafts from head office/overseas branches, and nostro overdrafts not adjusted within five days) has been doubled from 25% to 50% of unimpaired Tier I capital, or USD 10 million (whichever is higher). The previous limit was set in March 2004. Borrowings for export credit in foreign currency and capital instruments remain outside this limit.
What it means for you
Banks can now tap overseas markets more aggressively for funding, improving liquidity management and potentially lowering costs. This liberalization supports banks in expanding foreign currency lending and managing balance sheet mismatches. However, banks must ensure compliance with FEMA regulations and monitor their Tier I capital ratios closely.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Update internal policies to reflect the new 50% limit on overseas borrowings.
Review current overseas borrowing levels against unimpaired Tier I capital to ensure compliance.
Inform treasury and risk management teams about the enhanced limit for planning.
Communicate the change to relevant constituents and customers as advised by RBI.
Who it affects
AD Category-I Banks, Treasury departments of banks, Risk management teams, Banks' foreign branches and correspondents
RBI’s words: “Attention of Authorised Dealer Category - I (AD Category – I) banks is invited to A. P. (DIR Series) Circular No. 23 dated October 15, 2008”
RBI’s words: “A.P.(DIR Series) circular no. 23 dated October 15, 2008 in terms of which, inter alia”
📜 Read the original circular — full text as issued by RBI
RBI/2008-09/227
A. P. (DIR Series) Circular No. 23
October 15, 2008
To,
All Authorised Dealer Category –I Banks
Madam / Sir,
Overseas Foreign Currency Borrowings by Authorised Dealer
Banks – Enhancement of limit
Attention of Authorised Dealer Category - I (AD Category – I) banks is invited to A. P. (DIR Series) Circular No. 81 dated March 24, 2004 , in terms of which :
(i) all categories of overseas foreign currency borrowings including existing ECBs, loans and overdrafts from their Head Office, overseas branches and correspondents and overdrafts in Nostro accounts (not adjusted within five days) shall not exceed 25 per cent of their unimpaired Tier I capital as at the close of the previous quarter or USD 10 million (or its equivalent), whichever is higher, and
(ii) overseas borrowings by AD Category – I banks for the purpose of financing export credit in foreign currency, subordinated debt placed by head offices of foreign banks with their branches in India as Tier II capital, capital funds raised/augmented by the issue of innovative perpetual debt instruments and debt capital instruments in foreign currency and any other overseas borrowings with the specific approval of the Reserve Bank would be outside this limit.
2. With a view to providing greater flexibility to AD Category - I banks in seeking access to overseas funds, it has been decided to liberalise this facility further. Accordingly, AD Category - I banks may henceforth borrow funds from their Head Office, overseas branches and correspondents and overdrafts in nostro accounts up to a limit of 50 per cent of their unimpaired Tier I capital as at the close of the previous quarter or USD 10 million (or its equivalent), whichever is higher, as against the existing limit of 25 per cent (excluding borrowings for financing of export credit in foreign currency and capital instruments).
3. All other instructions contained in A. P. (DIR Series) Circular No.81 dated March 24, 2004 remain unchanged.
4. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
5. Necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 ( Notification No.FEMA.3/2000-RB dated May 3, 2000 ) shall be issued separately.
6. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions/approvals, if any, required under any other law.
Yours faithfully,
(Salim Gangadharan)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/227 · issued 15 Oct 2008. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4543&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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