Banks to be told to cut exposure to big firms
The central bank is also examining the exposure of banks to infrastructure SPVs on both standalone basis based on rating and on the basis of group exposure.
The need to strengthen India’s nascent corporate debt market has been raised by a number of committees including the Deepak Parekh committee on infra financing as well as a more recent panel that is looking into infrastructure funding for the Twelfth Five Year Plan.
The central bank also has called for developing the corporate bond market in order to diversify risk, enhance financial stability, and have better matching of risk-return preferences of the borrowers.
* The plan is to scale down bank financing between 10-25% of the total debt financing for listed companies
* Banks will soon be asked to cut their exposure to top listed companies by 10% of their current levels
* The headroom created will free up bank lending for more sectors and ensure a large volume of top-quality bond papers arrive in the corporate bond market
* The RBI is also examining the exposure of banks to infrastructure SPVs based on rating and group exposure
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