RBI may cut Held-To-Maturity ceiling of banks

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Fast-tracking the ideas to improve liquidity and soon after announcing CRR cut, the Reserve Bank of India (RBI) has now said that it may cut Held-To-Maturity (HTM) ceiling of banks.

"It is a fact that HTM is on higher side. We will looking at that report in the context of cutting down of HTM to improve market liquidity," said RBI's deputy governor Anand Sinha at a conference on Wednesday where, however, he did not specify a timeframe for when the central bank would cut the ceiling.

Under HTM, banks are required to hold government securities until its date of maturity and currently the RBI has imposed a ceiling of 25 per cent. This limit is also kept in alignment with the banks' Statutory Liquidity Ratio (SLR), which is the portion of minimum investments in gilts and other approved securities by banks.

Sinha's statement lifted yields on 10-year 8.15% 2022 gilt securities to a day's high of 8.22 per cent.

Besides, RBI governor also said that the central bank will not step in the forex market to boost its foreign exchange reserves. "No, we will not intervene to boost our foreign exchange reserves," said RBI governor D Subbarao.

Story first published: Thursday, November 1, 2012, 13:30 [IST]
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