Financial Daily from THE HINDU group of publications
Wednesday, May 19, 2004
Financial Daily from THE HINDU group of publications Wednesday, May 19, 2004 |
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RBI & Other Central Banks Markets - Stock Markets RBI lowers margins on loans against shares Our Bureau
Mumbai , May 18 IN a bid to provide more liquidity to investors, the Reserve Bank of India today reduced the margins for bank financing against shares from 50 per cent to 40 per cent with immediate effect. The decision to reduce margins follows the recommendations of the Task Force constituted by RBI for monitoring developments in the financial markets. Today's decision follows the crash in stock prices since last week. Several brokers had been facing financial problems and reduction in margins is likely to give some relief to them. In a statement RBI said, "Based on the recommendations, the RBI had decided to restore the status quo ante on margins that banks have to maintain for financing against shares, IPOs and issue of guarantees." It said the minimum cash margin of 25 per cent (within the margin of 50 per cent) stands reduced to 20 per cent. The central bank had increased the margin from 40 per cent to 50 per cent in January 2004 in order to cool down the rising stock market.
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