Guv unveils 22 measures to bolster credit flow

The Reserve Bank of India (RBI) on Wednesday announced a flurry of measures — twenty two of them, to be precise — aimed at boosting credit flows to the real economy and promoting ease of doing business while lowering banks’ costs.

- MANOJIT SAHA

These include a nod for banks to fund acquisitions of Indian non-financial sector companies, upgraded ceilings for loans against securities and IPO financing, and tweaks to risk weights on home loans.

“We need to continue looking at rationalising our regulations so that the productive needs of the economy are met with the least of compliance burden, the least of cost. While at the same time, ensuring that wherever prudential measures are required, they are not compromised,” RBI Governor Sanjay Malhotra said in a press conference.

Indian banks are now also allowed to fund acquisitions of non-financial entities and to finance land acquisition by special purpose vehicles, quelling a long standing demand of lenders.

Another significant measure to bolster credit flows to India Inc was the removal of the ₹10,000 crore loan ceiling for a specific borrower by the banking system, although bank-specific restrictions continue.

Loans by a bank are capped at 20 per cent of its net worth to a particular borrower and 25 per cent to a group.