The Reserve Bank on Wednesday extended the transition period given to the banks to treat advances to equity-oriented mutual funds(MF) as capital markets exposure by six more months.

The banks would also have to comply with the norms that consider payment commitments made by them to bourses to facilitate transactions by MFs within the limit of their capital markets exposure.

“On a review, it has been decided to further extend the transition period up to June 30, 2010,” the RBI said in a notification here on Wednesday.

Earlier, the banks had been asked to comply with the guidelines by December 31. The central bank had earlier asked the banks to be judicious in extending finance to MFs and grant loans and advances to them only to meet their temporary liquidity needs for the purpose of repurchase or redemption.

If the loan was extended to equity-oriented MFs, it would be considered as a part of banks’ capital market exposure.

Also, the RBI said, if banks issued irrevocable payment commitments (IPCs) in favour of stock exchanges on behalf of MFs to facilitate the transactions done by these clients, it would form part of their exposure to capital markets.

More In: Business | Markets