RBI for periodic interest reset on long-term fixed-rate loans for loan takers

Banks which have not issued long-term bonds (having a minimum maturity of 5 years) to the extent of their exposure to the infrastructure sector (which have a minimum residual maturity of 5 years) could utilise the room available to issue more long-term bonds which would help release resources for extending long-term fixed-rate loans, the report said.

Banks should popularise the fixed deposit schemes with tenors of over five years as the same are eligible for tax exemption. This would to some extent meet the long-term funding requirement of banks, the regulator said.

Large institutional investors like pension funds, provident funds, insurance companies, etc should be encouraged to invest in bonds issued by banks, it added.

In this regard, the report suggested that banks explore the option of take-out financing apart from promoting securitisation market for better asset liability management.