RBI notifies easier norms on bond sales for infrastructure, affordable housing :: Banks can raise long-term funds to lend to affordable housing and infrastructure, the Reserve Bank of India (RBI) said on Tuesday. The seven-year bond with no secondary market trading option can be issued by banks at a fixed or variable rate. As announced in the Budget, the bonds will not attract any statutory pre-emption such as cash reserve ratio (CRR) or statutory liquidity ratio (SLR). Besides, they need not set aside additional funds for meeting priority sector requirements, which effectively translates into lower fund costs for banks. Raising long-term resources is expected to help banks address their asset-liability mismatches. The Reserve Bank in a notification to banks clarified that these bonds cannot be sold to other banks. Bankers say the target buyers are long-term investors such as pension funds and insurance companies which have been reluctant investors in Indian debt. Investors who invest in REIT (real estate investment trust) funds would invest in these bonds. Insurance funds and mutual funds would invest in these bonds. However, the regulators, Irda and PFRDA, would have to say these bonds are permissible investment papers for insurance and pension companies, said Ajay Marwaha, executive vice-president and head-trading at HDFC Bank. Raising funds through such bonds will help banks raise more resources for affordable housing as well as for what is technically termed as infrastructure, RBI said. Banks now have an avenue for raising long-term funding to finance infrastructure projects and affordable housing projects. Builders today get financed at very high interest rates, so there will be demand for this alternative source of funds. Banks will tap any market where there is a spread, said Marwaha. According to RBI, affordable housing loans are those up to Rs 50 lakh made to individuals for houses with value up to Rs 65 lakh in Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad and Rs 40 lakh for houses with value up to Rs 50 lakh in other centre. Source: ET / Jul 16, 2014
Posted on: Fri, 18 Jul 2014 04:44:20 +0000