Oommen A. Ninan
The apex bank will introduce currency futures in eligible exchanges in consultation with SEBI
MUMBAI: The Reserve Bank of India on Tuesday raised the limit of bank loans to individuals for housing (with a lower risk weight of 50 per cent) to Rs. 30 lakh from Rs. 20 lakh. This move is expected to reduce the cost funds of housing loans up to Rs. 30 lakh.
Presenting the Annual Policy Statement for 2008-09, RBI Governor Y. V. Reddy said banks were asked to pass on this benefit to applicants for home loans.
The RBI also relaxed asset classification norms for credit to infrastructure projects.
The RBI stated that it will introduce currency futures in eligible exchanges in consultation with the Securities and Exchange Board of India (SEBI). The broad framework is expected to be finalised by the end of May.
An RBI-SEBI standing technical committee has been set up to advice on the operational aspects with regard to the trading of currency futures on the exchanges.
In order to promote an incentive system for greater flow and efficient allocation of credit, an internal working group to be set up to look at issues relating to credit delivery, credit pricing and credit culture in a holistic manner.
With a view to bringing about greater transparency, the RBI is in the process of collecting details of various charges levied by banks for public dissemination.
The Reserve Bank stated that it is to carry out supervisory review of banks’ exposure to the commodity sector.
“Banks are required to review their advances to traders in agricultural commodities to ensure that bank finance is not used for hoarding,” the RBI stated.
It also decided to review the prudential guidelines for specific off-balance sheet exposures of banks. It would also review the regulations in respect of capital adequacy, liquidity and disclosure norms for systemically important non-banking financial companies.
An inter-departmental group would review the existing regulatory and supervisory framework for overseas operations of Indian banks.
The RBI however, felt that the present problem of some banks and their clients’ exposure to foreign derivative markets are only ‘micro issues’ and not a ‘systemic issue.’
The RBI’s measures — raising the Cash Reserve Ratio by 25 basis points to 8.25 per cent and keeping the Bank Rate (6 per cent) the short-term rates repo rate (7.75 per cent) and the reverse repo rate (6 per cent) unchanged — surprised market participants as they were expecting a rise in short-term rates and not expected another hike in CRR.
Reaction on bourses
Equity markets responded favourably to RBI measures and the benchmark BSE 30-share Sensex moved up by 363 points or 2.13 per cent to close at 17378.46, led by real estate mortgage and software companies.
The RBI asked banks to review lending to traders of agri commodities and advances against warehouse receipts to ascertain finances are not being used for hoarding which can fan inflation.
“Right now we do not have any evidence. We have asked the banks to review their lending (to traders) so that we know that they are not taking undue advantage of bank finances,” Dr. Reddy told reporters here. Through the review, the apex bank seeks to compare if there has been any significant rise in lending in these categories compared to that in previous years.