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Bangalore , Feb. 28

The move to convert recapitalisation bonds into tradable securities is likely to increase banks' lendable resources by at least another Rs 20,000 crore.

The Finance Minister, Mr P. Chidambaram, in his Budget speech said that the special securities issued to banks for capitalisation would be unwound and treated as SLR bonds.

Mr M.B.N. Rao, Chairman and Managing Director of Canara Bank, said, "These securities will now become repoable (eligible for repurchase operations of the RBI)."

At present, the recapitalisation bonds are neither part of the eligible category of securities for repurchase operations nor are they treated as eligible for Statutory Liquidity Ratio.

Mr Rao said the move would also contribute to help sustain credit-deposit ratio.

Mr N. Kantakumar, Chairman of Syndicate Bank, said that the Finance Minister's move to extend the 80 C benefits to the banking sector would be helpful. He said, "We will now have long-term deposits to the banking system, which will in turn help us fund long-term assets including infrastructure."

He said that the move to offer 7 per cent interest rate to farm credit would pave the way for greater credit offtake to the sector. Currently, farm lending is mandated at 18 per cent of the advances. But the banking sector average is about 16 per cent. Bankers said the reduction in rates would help banks achieve the targets.

More Stories on : Budget | Govt Bonds

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