The Reserve Bank of india will keep a close watch on the equity market which is in the grip of a bull run. The move followed the policy decision to hike the margin for bank's funding to any equity market related activities. | |
| The standing committee of central board of RBI, chaired by a deputy governor, met today to take a stock of the events following the decision. |
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| The cause for concern has been the rapid rise in BSE Sensex. Even the Z group scrips, which do not have sound fundamentals, has participated in rally which is primarily fuelled by the foreign exchange inflows from portfolio investors. |
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| The RBI's concern stems from apprehensions that any price bubble burst would result in an outflow of foreign exchange. |
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| The RBI hiked the margin for bank funding to share market from 40 per cent to 50 per cent so as to devise an disincentive to equity market exposure. |
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| However, the exposure of banks to stock market is way below the norm of 5 per cent except for some aggressive new generation private banks. |
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| The committee also decided that RBI will work out guidelines to allow banks to be the hub for receiving financial aid from retail customers for tsunami-affected people and places. At present, there is no formal structure in banks to receive individual donations. |
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