RBI allows banks with 12% capital ratio to borrow more from abroad

RBI allows banks with 12% capital ratio to borrow more
In a bid to increase capital flow in the country to help boost rupee, the Reserve Bank of India has announced that the banks capital adequacy ratio (CAR) of at least 12 per cent could avail of the higher foreign borrowing facility, said Business Standard.

Earlier, the central bank announced the current foreign borrowing limit for banks from 50 per cent of unimpaired Tier-I capital to 100 per cent, said the media report. Moreover, under the guidelines issued by RBI, Banks were also given the option to swap such borrowing with RBI at a concessional rate of 100 basis points below the swap rate prevailing in the market.

"If banks wanted to borrow 100 per cent of their unimpaired Tier-I capital, they should have a board approved policy on foreign borrowings with the risk management practices the bank would adhere to while borrowing abroad in foreign currency," RBI told media.

However, among large public sector banks, State Bank of India, Punjab National Bank and Bank of Baroda had CARs of more than 12 per cent. The government is infusing capital in public sector banks, and this would improve their CARs.

Dion Global Solutions Ltd.

Story first published: Wednesday, September 11, 2013, 9:10 [IST]
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