Fis Get More Flexibility

The term money market received yet another shot in the arm with the Reserve Bank of India (RBI) giving more flexibility to financial institutions (FIs) in their short term fund raising programmes.

RBI has effectively increased the fund raising limits in the short end for the FIs which will take care of their short term advances portfolio in the current financial year. ICICI and IDBI had announced their intention to advance short term loans.

The Reserve Bank liberalised the short term fund raising norms for select FIs on Saturday. The institutions have been warned by the apex bank that they do not disrupt the financial markets in their fund raising process.

Under the revised norms, the Industrial Development Bank of India (IDBI), the Industrial Credit and Investment Corporation Of India (ICICI) and the Industrial Finance Corporation of India (IFCI) will now have umbrella limits restricted to their net owned funds (NOF) as against instrument specific limits earlier. The FIs will now have to limit their total short term borrowings to the extent of their new owned funds.

The NOF of the three institutions are: ICICI Rs 4,109 crore as on March 31, 1997 as against Rs 2,435 crore previous year, IDBI Rs 7138 crore for six months ending September 30, 1996 and IFCI Rs 1,635 crore on March 31 1996. The NOF of both IDBI and ICICI are expected to go up once annual results are announced. RBI had allowed ICICI to raise around Rs 2,100 crore through Fixed Deposits and CDs. IDBI was given permission to raise Rs 3,800 crore.

Interestingly the Reserve bank has not slapped SLR and CRR on the liabilities to be raised by FIs.