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Money > Business Headlines > Report October 22, 2001 |
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Unclear non-SLR investments by banks worry RBI
In his address to top bankers while unveiling the mid-term review of the Monetary and Credit Policy, RBI Governor Bimal Jalan said a review of non-SLR investments reveals that the ease with which funds are mobilised through privately-placed debt issues could lead to their use for risky purposes, other than what are disclosed in the offer documents. Jalan cautioned bankers to adopt an internal system of prudential limits to mitigate adverse impact of concentration and illiquidity. They should also put in place a proper risk management system for timely remedial measures. While the central bank has initiated the process of collection and dissemination of some relevant information under the existing legal provisions of the Credit Information Bureau, it asked banks and financial institutions to evolve a reporting mechanism with regards to the investments made in privately placed bonds and securities. Banks and financial institutions should undertake due diligence on the intrinsic viability and bankability of projects financed through issuance of bonds. Overall, any proposal of direct or indirect financing of government budgets directly or through special purpose vehicles should be eschewed and proposals should be for specific monitorable projects, particularly in capital-intensive and high cost sectors, including infrastructure. RBI also advised banks to furnish certain additional disclosures in the "notes on accounts", in their balance sheets from the current year, which include movement of provisions held towards non-performing assets and movement of provisions held towards depreciation on investments. In this context, he said, RBI is currently in discussions with banks and the Institute of Chartered Accountants of India to set up a working group to identify the compliance as also gaps in compliance with the accounting standards of the corporate entities. This will ensure that the corporates present a true and fair view of their financial position. UNI YOU MAY ALSO WANT TO READ:
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