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April 9, 2001
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Money > Business Headlines > Report April 9, 2001 |
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Inter-bank exposure norms soonBS Banking Bureau The Reserve Bank of India is likely to lay down norms on inter-bank exposures as part of its risk management measures. The norms are likely to be spelt out in the forthcoming credit policy. The issue came up for discussion at Finance Minister Yashwant Sinha's meeting with public sector bank chiefs on Saturday. Such a step has been triggered by the Rs 1.37-billion pay order scam, which has hit Bank of India. The public sector bank discounted over Rs 20 billion worth of pay orders issued by the Ahmedabad-based Madhavpura Mercantile Co-operative Bank between January and March 1, and finally lost Rs 1.37 billion when it discovered that the co-operative bank did not have funds to honour bankers' cheques. Even though BoI is interpreting the development as a failure of the payments system, the central bank is looking at BoI's failure in risk management. In other words, BoI should not have taken such a huge exposure in a little known co-operative bank. At Saturday's meeting, RBI deputy governor SP Talwar and banking secretary Devi Dayal hinted at exposure norms for banks in this regard. "At present, banks follow some exposure norms when it comes to subscribing to the subordinated debt issues of other banks. There should be an overall exposure limit, including lending in overnight market as well as discounting instruments, besides investments in subordinated debt issues," said a banker who attended the meeting. Powered by ALSO READ:
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