What changed
RBI observed lapses by some Indian banks in overseas real estate transactions. It now requires boards to lay down detailed operational guidelines and policies for such deals. The policy must include an exit clause in lease/rental agreements and ensure compliance with both Indian and host-country laws.
What it means for you
Banks must formalize their overseas property dealings with board-approved policies, reducing legal and financial risks. This adds compliance burden but protects banks from host-country legal pitfalls. Lenders need to review and update their internal guidelines for all future overseas real estate transactions.
What you must do
- Get board approval for a policy covering sale/purchase and lease/rental of overseas property.
- Ensure all lease/rental agreements include a suitable exit clause.
- Verify compliance with FEMA, Banking Regulation Act, and host-country laws for each transaction.
- Audit past overseas property deals to identify and rectify any lapses.
Who it affects
All scheduled commercial Indian banks with overseas branches or offices, Bank boards and senior management responsible for overseas operations, Legal and compliance teams handling foreign real estate transactions
Does this circular apply to all Indian banks or only those with overseas offices?
It applies specifically to all scheduled commercial Indian banks that have offices abroad, as stated in the circular's address.
What key clause must be included in lease/rental agreements?
The policy must require that agreements for acquiring or letting out premises on rental or lease basis incorporate a suitable exit clause.
Are banks required to comply with host-country laws?
Yes, banks must ensure compliance with all applicable laws of the host country, city, or locality for property transactions.