More fund-raising options for co-op banks

RUN-UP TO THE CREDIT POLICY

The co-operative banks could come out with subordinate debt structures like tier-II bonds, tier-III bonds and upper tier-II or perpetual bonds to raise finance.

At present, these banks get financed from the National Bank for Agricultural and Rural Development (Nabard) to on-lend. A part of its funding also comes from the state government. They do not have independent fund-raising options.

The monetary policy, to be announced on Tuesday, may also come out with the final modalities for launching currency futures in the foreign exchange market.

In a meeting held recently, RBI and the Securities and Exchange Board of India have in principle zeroed in on the National Stock Exchange (NSE) as the favoured platform for launching the currency futures trading in India.

However, NSE may have to float an independent subsidiary to start currency futures. RBI has set up a committee to look into the operational details for launching currency futures.

While the product could be launched on NSE, the central bank will work out various details to compartmentalise the foreign exchange operations from the other operations of the exchange.

In its draft proposals, RBI was of the view there should be an independent, standalone exchange for floating this products. However, the government insisted on using the existing infrastructure of stock exchanges.

Thereafter, the internal committee of RBI suggested that any existing exchange, even if is allowed to float a platform for currency futures, should have diversified shareholding pattern.

The structure of the currency futures platform within the stock exchange will be similar to the Chinese wall maintained by banks in their primary dealer business.

There should be separate prudential and operational guidelines for participants and the platforms should be independent of the exchanges that promote them.

Moreover, the authority for regulating such platforms should be with RBI since foreign exchange management is a sole prerogative of the central bank. Banks, which will be the major participants in the currency futures business, are regulated by RBI.