Mechanism To Monitor Bank Fund Flow To Ses On Cards

The government is studying the possibility of setting up a centralised monitoring mechanism to control the flow of funds from the banking system to the stock markets.

The finance ministry has begun discussions with the RBI and the Securities and Exchange Board of India to work out the modalities of the mechanism.

But, it is likely to be a difficult issue as Sebi and the RBI have divergent views on who should be responsible for guiding the exposure of the banks in the stock market.

The issue of a controlling mechanism has acquired an urgency in the wake of the recent stock scam where some of the brokers played in the markets with funds raised from the cooperative and private sector banks.

The government is worried that the JPC on the stock scam will insist on such a measure since the previous scam was also largely funded by the flow from the banking sector.

According to sources, though there is an RBI guideline, issued last November on the upper limit of individual banks