RBI Finally Tighten Banks’ Capital Market Exposure

RBIReserve Bank of India (RBI) has finally tightened banks’ capital market exposure by implementing new rules and regulations.

In a circular, RBI has told that entities such as FIIs are not permitted to avail of fund or non-fund based facilities such as irrevocable payment commitments (IPCs) from banks, under the provisions of the Foreign Exchange Management Act (FEMA). The banks have been asked to unwind all such guarantees given on behalf of FIIs within six months.

RBI’s Restriction On Foreign Venture Capital Funds

RBIMumbai: The central bank (RBI) has specified that the foreign venture capital (VC) funds those kick in a part of the investment upfront, will get entry to Indian markets.

The condition laid down by RBI is related to some credible capital obligation before obtaining a formal registration.

Typically, a new foreign venture capital fund first forms an investment holding company in Mauritius with rudimentary capital, often not more than a few dollars. The investment company then files for registration with Indian regulators, and once it gets the approval overseas investors are gradually roped in.

Now RBI’s CRR @ 7.5%

Mumbai: The Indian central bank (RBI) has annihilated the anticipations of interest rates alleviation by raising CRR, the sum of money banks must hold in cash, by 0.5 percent (now 7.5%) to drain liquidity regardless of inflation at a five-year low.
But the RBI do not make any changes in the key lending and borrowing rates (repo and reverse repo) and bank rate in the mid-term appraisal of the monetary plan.
Cash Reserve Ratio (CRR) is the amount of cash that is demanded by the banks to park with RBI that does not pay up any interest on such depositions.