RBI has said that banks can now give personal loans up to Rs 5 crore to the directors of their competing banks. Earlier this limit was up to Rs 25 lakh. RBI circular states that without the approval of the Board of Directors or the Management Committee, banks should not give loans or advances of more than 5 crores to the spouses, minors or dependent children of other directors, relatives other than should give. This condition will also be applicable to a company where a relative other than the spouse and dependent children is a partner, director or major shareholder. In such a situation, even that company will not get a business loan of more than Rs 5 crore.
New rule to check arbitrariness of bank directors
RBI has said in its circular that this rule will be applicable to all scheduled commercial banks except Regional Rural Banks (RRBs), Small Finance Banks and Local Area Banks. In fact, the RBI has implemented this rule to prevent the directors of banks from taking advantage of their position. Many bank directors have been taking wrong advantage of their position to give loans to their relatives.
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Chanda Kochhar had misused the post with huge loan
In this regard, the case of Chanda Kochhar, the then MD and CEO of ICICI, who had given a loan of Rs 3250 crore to her husband’s company and Videocon, came in the past. Chanda Kochhar was later removed from this post. However, he challenged the decision of removal from the post in the Bombay High Court. But the court did not hear his petition. His lawyer argued that the bank had accepted Kochhar’s voluntary resignation. Therefore, getting them fired later is absolutely illegal and against the rules.