Published on Mon, Dec 18, 2006 at 08:51 | Source : Moneycontrol.com
Updated at Mon, Dec 18, 2006 at 09:49
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Norms for banks' capital market exposure revised
The RBI on Friday announced revised guidelines that will govern capital market exposures. The new rules are identical to the draft rules put out on 30th of November. They restrict all capital market exposure of banks to 40% of the bank's net worth and all direct exposure to 20%, reports CNBC-TV18.
The RBI on Friday announced revised guidelines that will govern capital market exposures. The new rules are identical to the draft rules put out on November 30. They restrict all capital market exposure of banks to 40% of the bank's net worth and all direct exposure to 20%, reports CNBC-TV18.
Direct exposure would include investments in shares, convertible bonds / debentures, next units of equity-oriented mutual funds and all exposures to venture capital funds.
Under the older dispensation banks could invest 5% of their incremental advances in capital markets. Next the shift to a new base of networth is intended to link a bank's investment in risky assets to its free reserves, that is its risk taking ability.Further, banks have been instructed not to extend credit facilities directly or indirectly to stockbrokers for arbitrage operations in stock exchanges.
Also under the new rules the board of each bank should fix a sub-ceiling for total advances to stockbrokers and market makers and next to any single stock broking entity, including its associates/ inter-connected companies.
The RBI on Friday announced revised guidelines that will govern capital market exposures. The new rules are identical to the draft rules put out on November 30. They restrict all capital market exposure of banks to 40% of the bank's net worth and all direct exposure to 20%, reports CNBC-TV18. 
