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The Reserve Bank of India has allowed banks to grant certain loans to their CEOs and Directors by doing away with the prior approval requirement. In a notification issued in Mumbai yesterday, the RBI said banks can give loans to CEOs and Whole Time Directors for purchasing of car, personal computer, furniture, constructing/acquiring a house for personal use, as festival advance and as credit limit under credit card facility.
While section 20 of Banking Regulation Act, 1949 prohibits banks from granting any loan or advance to any of its directors. Now, the RBI has said that this decision has been taken to streamline the existing process and also to obviate the need to approach RBI on case-to-case basis. The apex bank has said that the base rate will not be applicable on the interest charged on such loans, however the interest rate cannot be lower than the rate charged on loans to the bank's own employees.
In another notification, the RBI has allowed banks to invest in equities of financial service ventures including stock exchanges and depositories without any prior approval.
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