The bank regulator, RBI, has extended the deadline for banks to adhere to certain mutual fund norms. The RBI, in a notification said that the banks would now be allowed to comply with these norms by June 30, 2010. According to the norms, banks should lend to mutual fund only to meet the temporary liquidity requirements to a maximum of 20 percent of the net asset of the scheme and for a period not exceeding six months. The loans if offered to equity schemes of mutual funds would form a part of the banks' capital market exposure. Non-fund based credit such as irrevocable payment commitments, or IPCs, for purchase of shares will also form a part of banks' capital market exposure. RBI, in its annual financial inspection reports of certain banks and an analysis of the consolidated prudential return of banks had discovered that a few banks had extended excessive loans to various mutual funds. The apex bank, in December had classified these exposures as capital market exposures.
|