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RBI eases cash balance requirements for banks

Reuters  |  MUMBAI 

By Suvashree Choudhury

(Reuters) - The Reserve of (RBI) will allow banks to use all their to meet the central bank's new reserve ratio requirements, not just a certain amount of the money, in a technical but important move that could provide relief to the country's banks.

The RBI on Saturday had ordered banks to put all the deposits they accumulated between mid-September and mid-November under the central bank's reserve ratio. The banks had been flooded with deposits after the government banned larger notes.

That created problems for banks. Under India's complicated rules for holdings, only a certain amount of the they hold in their vaults is eligible to be placed under reserve requirements.

Those issues should now be resolved. The RBI in a statement on Wednesday widened the criteria for that can be included, including all the 500- and 1,000-rupee notes the government abolished this month.

"In the wake of deposits of specified notes in massive quantity and accumulations thereof, the above instructions have been revisited," the RBI said.

The move triggered a big rally in banking shares as well as bonds.

Investors had worried that banks would have to scramble to get the required to place with the RBI under the more stringent reserve ratio requirements.

The 10-year benchmark bond's yield fell 8 basis points to 6.24 percent on Wednesday, erasing almost all the losses on Monday after the RBI's announcement. The yield rose as much as 15 bps to 6.34 percent then.

The RBI said it will review the decision in the second half of February.

For RBI statement see http://bit.ly/2gjpZlK

(Editing by Rafael Nam, editing by Larry King)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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RBI eases cash balance requirements for banks

MUMBAI (Reuters) - The Reserve Bank of India (RBI) will allow banks to use all their cash to meet the central bank's new cash reserve ratio requirements, not just a certain amount of the money, in a technical but important move that could provide relief to the country's banks.

By Suvashree Choudhury

(Reuters) - The Reserve of (RBI) will allow banks to use all their to meet the central bank's new reserve ratio requirements, not just a certain amount of the money, in a technical but important move that could provide relief to the country's banks.

The RBI on Saturday had ordered banks to put all the deposits they accumulated between mid-September and mid-November under the central bank's reserve ratio. The banks had been flooded with deposits after the government banned larger notes.

That created problems for banks. Under India's complicated rules for holdings, only a certain amount of the they hold in their vaults is eligible to be placed under reserve requirements.

Those issues should now be resolved. The RBI in a statement on Wednesday widened the criteria for that can be included, including all the 500- and 1,000-rupee notes the government abolished this month.

"In the wake of deposits of specified notes in massive quantity and accumulations thereof, the above instructions have been revisited," the RBI said.

The move triggered a big rally in banking shares as well as bonds.

Investors had worried that banks would have to scramble to get the required to place with the RBI under the more stringent reserve ratio requirements.

The 10-year benchmark bond's yield fell 8 basis points to 6.24 percent on Wednesday, erasing almost all the losses on Monday after the RBI's announcement. The yield rose as much as 15 bps to 6.34 percent then.

The RBI said it will review the decision in the second half of February.

For RBI statement see http://bit.ly/2gjpZlK

(Editing by Rafael Nam, editing by Larry King)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22

RBI eases cash balance requirements for banks

By Suvashree Choudhury

(Reuters) - The Reserve of (RBI) will allow banks to use all their to meet the central bank's new reserve ratio requirements, not just a certain amount of the money, in a technical but important move that could provide relief to the country's banks.

The RBI on Saturday had ordered banks to put all the deposits they accumulated between mid-September and mid-November under the central bank's reserve ratio. The banks had been flooded with deposits after the government banned larger notes.

That created problems for banks. Under India's complicated rules for holdings, only a certain amount of the they hold in their vaults is eligible to be placed under reserve requirements.

Those issues should now be resolved. The RBI in a statement on Wednesday widened the criteria for that can be included, including all the 500- and 1,000-rupee notes the government abolished this month.

"In the wake of deposits of specified notes in massive quantity and accumulations thereof, the above instructions have been revisited," the RBI said.

The move triggered a big rally in banking shares as well as bonds.

Investors had worried that banks would have to scramble to get the required to place with the RBI under the more stringent reserve ratio requirements.

The 10-year benchmark bond's yield fell 8 basis points to 6.24 percent on Wednesday, erasing almost all the losses on Monday after the RBI's announcement. The yield rose as much as 15 bps to 6.34 percent then.

The RBI said it will review the decision in the second half of February.

For RBI statement see http://bit.ly/2gjpZlK

(Editing by Rafael Nam, editing by Larry King)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22

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