The Reserve Bank of India for the second time has extended the deadline for banks to include loans to mutual funds and the Irrevocable Payment Commitments (IPCs) to stock exchanges (BSE & NSE) on behalf of MFs or FIIs under the capital market exposure. The RBI has given three months time to the banks — from September 13 to December 13 to meet the norms.
Earlier RBI had extended the deadline in June by three months to September 13.
Banks give large loan to mutual funds and also issue IPCs to the stock exchanges on behalf of MFs or FIIs, but they have not included these under their capital market exposure for calculation. In a notice issued by RBI it was stated that as a result, RBI, upon review, has decided to extend the deadline for banks to meet the terms of the guideline.
According to RBI norms, banks can extend loans and advances to MFs only for fulfilling their temporary liquidity needs for the purpose of repurchase or redemption of units within the ceiling of 20 per cent of the net asset of the scheme and for a period not exceeding six months. And such finance, in case granted to equity-oriented mutual funds, it will form part of banks’ capital market exposure.
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