The Reserve Bank of India has issued a directive allowing banks to extend loans against foreign currency deposits, activating a new lending instrument.
Under the measure, commercial banks may use foreign currency deposit collateral as the basis for lending. The change opens new avenues for corporate finance by widening the range of acceptable security for loans.
The Reserve Bank periodically adjusts lending and collateral norms to support credit flow and manage the financial system. Permitting loans against such deposits adds flexibility for both banks and borrowers.
The directive is expected to give banks an additional tool for extending credit, with its uptake depending on demand from corporate clients and the conditions attached to the new facility.
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Sources:
https://tradingeconomics.com/india/stock-market