Rupee Loans to NRI Employees of Indian Companies under ESOP Scheme
Banks are allowed to extend loans in Rupees to resident employees of an Indian company to purchase shares of the company under Employees Stock Option (ESOP) Scheme, to the extent of 90 per cent of the purchase price of the shares or Rupees 20 lakh, whichever is lower. Rupee loans extended by banks under ESOP Scheme are treated as bank's exposure to capital market, within the overall ceiling of 40 per cent of its net worth.
RBI has received requests from banks for allowing them to grant Rupee loans to NRI employees of Indian companies for the purpose of buying shares of the companies under the ESOP scheme. The requests have been examined and it has been decided to allow Authorised Dealer Category - I (AD Category - I) banks to grant Rupee loans to NRI employees of Indian companies for acquiring shares of the companies under the ESOP Scheme. The loan scheme should be as per the policy approved by the bank's Board and would further be subject to the following conditions :
1. The loan amount should not exceed 90 per cent of the purchase price of the shares or Rupees 20 lakhs per NRI employee, whichever is lower.
2. The rate of interest and margin on such loans may be decided by the banks, subject to the directives issued by the Reserve Bank from time to time.
3. The amount shall be paid directly by the bank to the company and should not be credited to the borrowers' non-resident accounts in India.
4. The loan amount should be repaid by the borrower by way of inward remittances or by debit to his NRO / NRE / FCNR(B) account.
5. The loans will be included for reckoning capital market exposures and the bank will ensure compliance with prudential limits, prescribed by the Reserve Bank from time to time, for such exposure to capital market
RBI CIRCULAR NO. 7/RBI., Dated: August 22, 2007