banking reforms
Reserve Bank of India Governor Sanjay Malhotra said on Friday that removing the restrictions imposed on banks for acquisition finance will help the real economy. Last month, the RBI allowed banks to provide funds for acquisitions and increased the loan limit for buying shares in IPOs. This was part of several steps taken to boost bank lending in the world’s fifth largest economy.
Earlier, there were some restrictions on banks in giving loans to buy a company or acquire a business. Now this ban is being removed. With this, companies will be able to easily take money from the bank and buy other businesses or work together if needed. It is estimated that when companies will get money, investment will increase, new projects will start and this will boost the economy. The RBI chief said that you know, some conditions also come with these rules, like banks can give loan only up to 70% of the total value of the deal and there has to be a fixed limit between loan and investment. These things help in maintaining security and also provide more business to the banks and their customers.
Attention will be given to all issues
Speaking at the State Bank of India Banking and Economics Conference, Malhotra said that no regulator can and should not replace the decisions taken in the boardrooms of companies. Especially in a country like India where every case, every loan, every deposit and every transaction is different. He said that we should allow banks to take decisions after looking at each case individually, and not apply the same rules to everyone. The RBI chief said that RBI’s supervision has reduced the risks of uncontrolled growth and has helped in creating a strong, sustainable and balanced banking system. He said that RBI has enough resources to handle the newly arising risks like keeping more capital on loans as per risk, making necessary provisions and keeping additional security buffer.