RBI considers proposal to cut held-to-maturity limit for banks

Mumbai, Jan. 9 -- The Reserve Bank of India (RBI) is considering a proposal to bring down the held-to-maturity (HTM) limit in debt for banks in a non-disruptive manner said HR Khan, deputy governor, RBI, on Wednesday.

"We are working on to bring down HTM portfolio of banks in a non disruptive phased manner," said Khan speaking on the sidelines of capital market conference organised by the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Held-to-maturity is a category of debt banks must hold till redemption but which can be reshuffled once a year. The limit is currently set at 25% but traditionally has been aligned with banks' statutory liquidity ratio, or the mandated portion of deposits which banks must invest in government bonds and other approved securities, at 23%.

The RBI had said in October it was looking into a recommendation from a central bank committee to cut the HTM ceiling.

He said that there is need to create awareness among retail investors to strengthen corporate debt market. He said to bring down transaction costs in debt market and introduce a variety of products. He added the RBI was considering carving out a portion of the SLR for liquidity purposes, though no details were provided.

Published by HT Syndication with permission from Hindustan Times.