In yet another move to enhance liquidity and boost the flagging economy, the Reserve Bank of India (RBI) on Saturday unveiled a package of measures, including a reduction in provisioning norms for the real estate sector, capital market and housing loans.

Enthused by the recent fall in inflation to single digit, the RBI has also hiked the interest rates on foreign currency deposits to boost foreign inflows, extended sops to exporters and made a proposal to consider buyback of foreign bond issues made by Indian companies.

After injecting liquidity through a series of cuts in repo rate and cash reserve ratio, the RBI has decided that the provisioning requirements for all types of standard assets will stand reduced to a uniform level of 0.40 per cent (except direct advances to agricultural and SME sectors), paving the way for further fall in interest rates in these crucial segments.

These assets include standard advances for residential housing loan beyond Rs 20 lakh, advances in the commercial real estate sector, personal loans including outstanding credit card receivables, loans and advances qualifying as capital market exposure and non-deposit taking systemically important NBFCs.

“The RBI move will enable banks to extend cheaper funds towards the capital market exposure. This will be good news for the market after its six per cent fall last week,” said a banking source. Provisioning for home loans was earlier hiked from 0.25 per cent to 1.0 per cent and for other types of loans, it was increased from 0.25 per cent to 2.0 per cent.

According to the RBI, all unrated claims on corporates and claims secured by commercial real estate will attract a uniform risk weight of 100 per cent as against 150 per cent earlier which was applicable for exposures above Rs 50 crore from April 1, 2008 and for exposures above Rs 10 crore from April 1, 2009. Claims on rated as well as unrated non-deposit taking non-banking financial companies (NBFC-ND-SI) will be uniformly risk weighted at 100 per cent.

The central bank has decided to allow housing finance companies (HFCs) registered with the National Housing Bank (NHB) to raise short-term foreign currency borrowings under the approval route. As foreign currency convertible bonds (FCCBs) issued by Indian corporates are currently trading at a discount, the RBI will consider proposals from Indian companies to pre-maturely buy back their FCCBs.

In order to boost foreign exchange inflows, the RBI has also increased the interest rate ceiling on FCNR (B) deposits by 75 basis points. With exports taking a big beating, it has decided to extend the period of entitlement of the first slab of pre-shipment rupee export credit, currently available at a concessional interest rate ceiling of the benchmark prime lending rate (BPLR) minus 2.5 percentage points from 180 days to 270 days with immediate effect.

The RBI has enhanced the eligible limit of the export credit refinancing (ECR) facility for scheduled banks to 50 per cent of the outstanding export credit eligible for refinance from the current level of 15 per cent. This will provide additional liquidity support of Rs 22,000 crore to banks.

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