Banks get more time to rejig loans to mutual funds:BL 241209
Banks have got an extension of six months to restructure their loans to mutual funds and Irrevocable
Payment Commitments (IPCs) issued in favour of stock exchanges.The Reserve Bank of India, in a
notification issued on Wednesday, extended the time for banks to comply with the guideline from December
31, 2009 to June 30, 2010.
The RBI had asked banks to be judicious in extending finance to mutual funds and grant loans to MFs only
to meet their temporary liquidity needs. Bank loans to MFs should be only for the purpose of repurchase or
redemption of units within the ceiling of 20 per cent of the net asset of the scheme and should not be for
more than six months, the RBI said. Such loans to equity-oriented MFs would form part of banks' capital
market exposure.
With regard to IPCs, the RBI said that they should be treated on par with guarantees issued for the purpose
of capital market operations and will, therefore, form part of the capital market exposure.