Indian Banks Association seeks easing lending to funds

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Mumbai, November 3: : A top body of banks on Sunday sought "considerate" interest rates and collaterals for mutual funds to access money from banks to handle redemptions, top bankers said on Sunday.

On Saturday, the Reserve Bank of India said banks may avail of additional liquidity support to the extent of 400 billion rupees to meet the requirements of mutual funds and non-banking finance firms.

Last month, the central bank allowed a similar window to the extent of 200 billion rupees, of which 80.65 billion rupees have been availed of, Indian Banks Association's chief executive, K. Ramakrishnan, said.

The IBA is a body of more than 160 members including state-run, private, foreign and co-operative banks.

The IBA had discussions with the Association of Mutual Funds in India (AMFI) on Fridy, after which the latter issued relevant instructions to its members and at least one fund house has already approached for funds on Saturday, he said.

"Mutual funds should be more comfortable at this point in time and this should ease their redemption pressure," M.D. Mallya, chairman and managing director, Bank of Baroda said, adding most of the bigger banks have utilized their quota.

"It is a sort of confidence given to the mutual funds in case there is a liquidity issue, we are there to support".

The interest rates charged by the bank would be 11-12 per cent, Mallya said.

The IBA has urged its member banks to be considerate with collaterals against which it extends credit to mutual funds, Ramakrishnan said.

However, the strength of the individual fund house would also come into the picture while extending credit, M.V. Nair, chairman and managing director, Union Bank of India said.