RBI allowed AD Category-I Banks to borrow from International Financial Institutions

The Reserve Bank of India (RBI) decided to allow Authorised Dealer Category I (AD Category-I) Banks to borrow foreign currency from International/Multinational Financial Institutions (IFIs/MFIs).

In this regard, a notification was issued by the RBI on 25 June 2015.

Earlier, AD Cat-I Banks were allowed to borrow from IFIs/MFIs for a short period in 2013 with prior permission from the RBI on a case-by-case basis.

In contrast, as per the recent notification, the banks can borrow without any such prior approvals from the RBI.

However, these shall include only those IFIs in which the Government of India is a shareholding member or which have been established by more than one government or have shareholding by more than one government and other international organizations.

Further, such borrowings should be for the purpose of general banking business and not for capital augmentation.

The decision was taken by the RBI in order to provide greater flexibility in seeking access to overseas funds by the banks.

About AD Category-I Banks

Authorised Dealer Category -I Banks (AD Category–I Banks) is one of the three types of Authorised Money Changers (AMCs) approved by the RBI under Section 10 of the Foreign Exchange Management (FEMA) Act, 1999.

An AMC is a Full Fledged Money Changer (FFMC) permitted to deal in foreign exchange for specified purposes.

Other two AMCs are: Authorised Dealers Category - II (ADs Category–II) and Full Fledged Money Changers (FFMCs).

At present 102 entities are recognised as AD Category–I Banks including State Bank of India, Canara Bank and Axis Bank Ltd.

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