By -
Jul 15, 2014
India’s central bank allowed lenders
to sell long-term bonds exempted from reserve requirements to
boost funding for infrastructure and affordable housing.
The rupee-denominated bonds will have a minimum maturity of seven years and will be free from cash reserve and statutory liquidity ratio requirements and also so-called priority sector lending targets, the Mumbai-based Reserve Bank of India said yesterday.
Prime Minister Narendra Modi, in his first budget presented last week, pledged $25 billion to boost spending on developing the nation’s infrastructure, including highways, power plants, ports and housing. Loans to so-called priority housing rose 9 percent in the year to May 30 from a year earlier, compared with a 29 percent increase in home financing excluding priority lending, RBI statistics show.
“The central bank’s move makes it easier for banks to finance infrastructure projects by addressing asset-liability mismatches,” Arindam Saha, a Kolkata-based analyst at Credit Analysis & Research Ltd. said by phone. “The cost of funds will fall as lenders are being allowed to raise these funds without setting aside reserves.”
Modi and Finance Minister Arun Jaitley are making the improvement of India’s infrastructure a priority as they seek to boost the nation’s growth from near a 10-year low and curb India’s second-fastest inflation. They want to encourage private-sector funding of projects to allow for more than the government itself can finance.
The RBI defined affordable housing to include loans to individuals for as much as 5 million rupees ($83,000) to buy property in the nation’s six biggest cities and 4 million rupees in other locations.
Under RBI rules, Indian banks must provide at least 40 percent of their loans to priority sectors including agriculture and small businesses. They also need to set keep 4 percent of total deposits as cash reserves with the central bank, and 22.5 percent invested in mostly government bonds toward meeting statutory liquidity ratio.
To contact the reporters on this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net; Anto Antony in Mumbai at aantony1@bloomberg.net
To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net; Chitra Somayaji at csomayaji@bloomberg.net Dick Schumacher
The rupee-denominated bonds will have a minimum maturity of seven years and will be free from cash reserve and statutory liquidity ratio requirements and also so-called priority sector lending targets, the Mumbai-based Reserve Bank of India said yesterday.
Prime Minister Narendra Modi, in his first budget presented last week, pledged $25 billion to boost spending on developing the nation’s infrastructure, including highways, power plants, ports and housing. Loans to so-called priority housing rose 9 percent in the year to May 30 from a year earlier, compared with a 29 percent increase in home financing excluding priority lending, RBI statistics show.
“The central bank’s move makes it easier for banks to finance infrastructure projects by addressing asset-liability mismatches,” Arindam Saha, a Kolkata-based analyst at Credit Analysis & Research Ltd. said by phone. “The cost of funds will fall as lenders are being allowed to raise these funds without setting aside reserves.”
Modi and Finance Minister Arun Jaitley are making the improvement of India’s infrastructure a priority as they seek to boost the nation’s growth from near a 10-year low and curb India’s second-fastest inflation. They want to encourage private-sector funding of projects to allow for more than the government itself can finance.
The RBI defined affordable housing to include loans to individuals for as much as 5 million rupees ($83,000) to buy property in the nation’s six biggest cities and 4 million rupees in other locations.
Under RBI rules, Indian banks must provide at least 40 percent of their loans to priority sectors including agriculture and small businesses. They also need to set keep 4 percent of total deposits as cash reserves with the central bank, and 22.5 percent invested in mostly government bonds toward meeting statutory liquidity ratio.
To contact the reporters on this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net; Anto Antony in Mumbai at aantony1@bloomberg.net
To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net; Chitra Somayaji at csomayaji@bloomberg.net Dick Schumacher
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