Financial Daily from THE HINDU group of publications
Monday, Jul 12, 2004
Financial Daily from THE HINDU group of publications Monday, Jul 12, 2004 |
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Stock Markets Money & Banking - Private Banks Industry & Economy - Budget ICICI, HDFC Bank may seek higher exposure in capital market Sarbajeet K. Sen
New Delhi , July 11 PRIVATE banks are set to lead the fresh charge into the stock market by the sector in the wake of the announcement in the Union Budget of allowing higher capital market exposure for select banks. The Finance Ministry officials said that HDFC Bank and ICICI Bank could be the first ones to queue up before the RBI for acquiring a higher exposure limit than the existing 5 per cent of the banks' outstanding advances at the end of the previous fiscal. The Finance Minister, Mr P. Chidambaram, in his Budget speech, had said that the "banks with strong risk management systems would be given greater latitude in their exposure to the capital market." Officials said that feedback from the banking industry suggests that none of the public sector banks are likely to seek a higher exposure immediately. They pointed out that while some of the PSU banks might not yet have sufficiently strong risk management systems to warrant a higher exposure limit, a host of others have not yet reached the existing permissible limit of exposure in the capital market to come before the regulator with a request for such freedom. The permission from the RBI would be on a case-to-case basis, official said. "The RBI is unlikely to set a fresh higher limit within which the banks would have to limit their exposure," they said. However, the extra leeway that the banks would get is not expected to be much higher than the present level. "It is not as if the banks would be immediately given a exposure limit of double of that at present. They would, at best, get a percentage or two more than the present level," officials said. The announcement for higher exposure limit appears to be a bold move by the Government in the backdrop of the recent instances of banks overstepping the limit set by the RBI leading to a stock market scam and the subsequent setting up of the Joint Parliamentary Committee. However, in the aftermath of the scam, both the banking regulator and capital market regulator, the Securities and Exchange Board of India have improved their surveillance mechanisms for overseeing the functioning of the market players to spot irregularities. Under the present 5 per cent ceiling, banks are allowed exposure in the capital market in all forms including equity shares, convertible bonds and debentures, units of equity oriented mutual funds, advances against shares to individuals for investment in equity shares and unsecured advances to brokers and market makers. The board of banks have to fix the internal ceiling for each category within the overall ceiling.
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