RBI credit policy may look at rise in asset prices, diversion of bank funds
Mumbai: Among the critical issues that the Reserve Bank of India may address in its monetary and credit policy for 2006-07, slated for announcement on April 18, are rising asset prices and diversion of bank funds into the capital market.

There has been a persistent feeling that funds disbursed by banks and non-banking finance companies as term loans and consumer finance are finding their way to the stock markets.

Though bank officials have affirmed time and again that adequate mechanisms are in place to ensure correct use of credit provided by them, there is a fear that leakages could not be ruled out.

In its October 2005 monetary policy, RBI had rationalised the capital market exposure norms for banks by linking such exposure to bank's net worth as against a percentage of their advances. As a result individual banks were allowed to have higher limits.
Back to News Review index page