What changed
RBI issued a directive on September 27, 2012, continuing the interest rate ceiling on lines of credit with overseas banks at six-month LIBOR/EURO LIBOR/EURIBOR plus 250 basis points. This extends the previous cap set in March 2012, with no change in the rate or spread.
What it means for you
Banks can continue pricing their overseas lines of credit at the same capped rate, ensuring cost predictability for cross-border borrowing. This stability helps lenders manage funding costs and maintain compliance with RBI's interest rate regulations.
What you must do
- Ensure all new and renewed lines of credit with overseas banks adhere to the ceiling of six-month LIBOR/EURO LIBOR/EURIBOR plus 250 bps.
- Update internal policies and loan documentation to reflect the continued directive until further orders.
- Monitor LIBOR/EURIBOR rates regularly to ensure compliance with the cap on interest charges.
- Review existing credit lines to confirm they are within the prescribed ceiling and adjust if necessary.
Who it affects
Scheduled commercial banks (excluding RRBs), Treasury and international banking departments, Banks with cross-border credit lines
What is the current interest rate ceiling on lines of credit with overseas banks?
The ceiling is six-month LIBOR/EURO LIBOR/EURIBOR plus 250 basis points, as per RBI's directive dated September 27, 2012.
Does this directive change the previous ceiling?
No, it continues the existing cap from March 2012 without any modification, until further orders.
Which banks are covered by this directive?
All scheduled commercial banks, excluding Regional Rural Banks (RRBs), are required to comply.