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August 24, 2001
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Money > Business Headlines > Report August 24, 2001 |
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RBI rejects foreign bankers' plea on capital normsFreny Patel & George Smith Alexander The Reserve Bank of India has struck down the request made to it by foreign banks in the country to relax the new capital norms, which will come into effect from March 31, 2002. The revised capital norms stipulate that foreign banks' exposure to Indian corporates through the external commercial borrowing route will no longer be counted as part of their capital. The central bank has told the banks that there will be no relaxation on this. However, the regulator is willing to review the matter on "a case-by-case basis" when it comes to the new exposure norms. The revised exposure norms have capped banks' exposure to a single corporate at 15 per cent, down from the earlier 20 per cent. Some of the foreign banks would be required to drastically cut their exposure to domestic corporates as a result of the new capital norms. Even though the RBI is against maintaining the status quo in respect of the capital norms, it has indicated to the banks that it would be willing to discuss with the respective banks issues relating to specific clients. If warranted, the RBI may allow a bank to have a higher exposure to a single corporate. Foreign banks took up the matter with the Indian Banks' Association in June to chalk out a common strategy. The meeting was convened by BNP Paribas chief executive and country manager Jonathan David Lyon who is also the IBA vice-chairman. These banks also wrote letters to the RBI requesting it to revise the norms to consider exposure through ECBs as part of the capital. While most foreign banks are comfortable about meeting the capital adequacy norm of 9 per cent, they argue that the central bank ought to give banks more time to bring in additional funds in keeping with their asset book size as ECBs will no longer be regarded as part of the capital. The present norms require a foreign bank with a one branch operation to bring in around $ 10 million and a further $ 5 million for every additional branch. Powered by YOU MAY ALSO WANT TO READ:
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