Mumbai : To boost trading in bonds, the Reserve Bank of India said it will gradually lower the ceiling on government securities that can be held-to-maturity (HTM) by banks to 22 %, from 24 %, beginning January.

The apex bank also announced it will extend the period that foreign investors can settle their over-the-counter government bonds to two days of their trade from one. The measure, traders said, could be aimed at facilitating the settlement of debt in the Euroclear platform to which India is planning to join soon.

Announcing the monetary policy, the central bank said it will cut the ceiling on HTM bonds from the current 24 % to 22 % in stages, starting in the two-week cycle from January 10, 2015.

RBI also doubled the limit for some importers hedging currency exposure to 100 % of their average turnover over the previous three years or the preceding year’s import revenue, whichever is higher. The previous limit was at 50 %.

Further, the apex bank relaxed rules for short- selling in G-secs and said it would continue injecting funds via one- day term repos, or cash-for-loans transactions, to keep money markets less volatile.

RBI allowed banks to include government bonds held by them up to another 5 % of their NDTL (net demand and time liabilities) within the mandatory SLR requirement as level 1 quality liquid assets (HQLA) to facilitate their meeting the LCR requirement.

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Lenders fear coal block cancellations may spike NPAs

Bankers expressed apprehension over the fallout of the Supreme Court decision to deallocate as many as 214 coal blocks, saying it could increase the already high NPA levels of banks.

“It could happen… I am not ruling it out, but again we are not pressing all the panic buttons. I don’t think there is a case for that. We need to be little patient and watch where it goes,” SBI Chairperson Arundhati Bhattacharya said.  SBI has over Rs 4,130 crore exposure to some of the affected firms.

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