Banks in demand

Fourteen banks rose by 4.12% to 13.62% at 10:15 IST on BSE after the new central bank chief announced new measures for banks on Wednesday, 4 September 2013.

Yes Bank (up 13.62%), IndusInd Bank (up 10.7%), Axis Bank (up 9.23%), Kotak Mahindra Bank (up 9.21%), ICICI Bank (up 7.81%), Federal Bank (up 7.66%), Union Bank of India (up 5.92%), HDFC Bank (up 5.85%), Bank of India (up 4.61%), Canara Bank (up 4.54%), Bank of Baroda (up 4.36%), IDBI Bank (up 4.36%), Punjab National Bank (up 4.12%) and State Bank of India (up 4.12%), edged higher.

The BSE Bankex was up 6.98% at 10,780.96. It outperformed the Sensex, which was up 2.20% at 18976.61.

Raghuram Rajan took over as the new governor of the Reserve Bank of India (RBI) on Wednesday, 5 September 2013.

In his statement, Rajan said that the RBI wants to help domestic banks bring in safe money to fund India's current account deficit. The RBI has been receiving requests from banks to consider a special concessional window for swapping FCNR deposits that will be mobilised following the recent relaxations permitted by the RBI.

The RBI will offer such a window to the banks to swap the fresh FCNR (B) dollar funds, mobilised for a minimum tenor of three years and over, at a fixed rate of 3.5% per annum for the tenor of the deposit.

Further, based again on requests received from banks, RBI has decided that the current overseas borrowing limit of 50% of the unimpaired Tier I capital will be raised to 100% and that the borrowings mobilised under this provision can be swapped with RBI at the option of the bank at a concessional rate of 100 basis points below the ongoing swap rate prevailing in the market.

The above schemes will be open up to 30 November 2013, which coincides with when the relaxations on NRI deposits expire. The RBI reserves the right to close the scheme earlier with due notice.

Among other measures, the new central bank chief said there was a need to accelerate the working of debt recovery tribunals and asset reconstruction companies and he will encourage banks to clean up their balance sheets and commit to raising capital when necessary.

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