Home Case Index All Cases FEMA FEMA + AT FEMA - 2018 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (4) TMI 681 - AT - FEMAViolation of FERA - lending against the deposit without taking any primary security - Held that:- Bank had lent money against the security of deposits in the NRNR accounts. There was no bar in such type of lending as is apparent from the RBI’s Notification. The bank was required to comply with the condition attached to such lending as prescribed by the RBI under the FERA/FEMA. One such condition was that the bank could grant loan facilities to resident individuals, firms, companies in India against the collateral of such fixed deposits. In spite of the aforesaid conditions of granting loans against collateral security of such deposits the bank continued to grant loans to the resident individual (third parties) treating them as primary security. Understood that the assets created out of the proceeds of the loan could only be the primary security and not the deposits in the present case. Thus, the action of the bank in lending against the deposit without taking any primary security was not in consonance with the provisions of the Act. Details as enumerated at para 5 supra, proves the violation of FERA. RBI’s suspension of the said account also point towards the wrong doing. Banks are expected to act as trustees of public money rather than misusing the powers granted by the regulators thereby facilitating abuse of the Act by unscrupulous persons. The appellant bank therefore cannot be absolved of the charges against it.
|