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Selloff: RBI may ease funding norms for banks

In a major move for funding of PSU divestment by scheduled commercial banks, the Reserve Bank of India said it will consider on a case-by-case basis relaxing the ceiling of five per cent on banks' exposure to capital market to enable them to finance the programme.

The relaxation will be made so as to keep the exposure of banks to the capital market in all forms, net of its advances for financing of acquisition of PSU shares within the regulatory ceiling of five per cent, the RBI said in a circular to all scheduled commercial banks.

The apex bank has also clarified that relaxation will be made subject to other prudential requirements prescribed earlier by RBI for banks' exposure to the capital market.

The RBI will also consider, on a case- by-case basis, relaxation in the credit exposure norms to an individual or group for lending for acquisition of PSU shares under the government of India divestment programme.

RBI has asked banks to take into account proceeds from the American or global depository receipts and external commercial borrowings for extending bank finance to successful bidders of the programme, it said.

The RBI further said proposals for financing successful bidders should be approved by their respective bank boards and it should be for acquisition of shares, including the open offer, wherever applicable and not for subsequent acquisition.

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