Money & Banking
-
Credit Policy
Markets
-
Stock Markets
Capital market exposure limit for banks hiked
Our Bureau
Chennai
,
Oct. 25
THE Reserve Bank of India has increased the sub-limit for capital market exposure of banks to 40 per cent of the net worth (own funds) of banks. Higher limits may be allowed for banks with sound controls.
This can be interpreted as a move to encourage banks to increase their exposure to the capital market sector - either increase investments in shares/units directly or give more loans to individuals and brokers.
The earlier limit for direct investments of banks (in shares, bonds, mutual fund units) was fixed at 20 per cent of their net worth.
The RBI had stipulated that these limits were subject to an overall capital market exposure ceiling of 5 per cent of the previous year's loans. Exposure under the new limits based on net worth would still come under the overall ceiling.
Banks as a group have never touched this ceiling.
It has been reported that HDFC Bank had been given regulatory permission to increase exposure to eight per cent of advances. The capital market exposure of all banks was at around 1.9 per cent of advances in 2005.
Going by the loans given as of March 2005 (nearly Rs 11,40,000 crore), banks would be able to lend or invest a maximum of about Rs 57,000 crore this fiscal.
Total exposure at the end of March 2005 was about Rs 17,000 crore.
Article
E-Mail
::
Comment
::
Syndication
::
Printer Friendly Page
|
