Banks Allowed To Borrow $ To Fund Assets

In a circular issued yesterday, the RBI also allowed for mismatches between the tenure of FCNR (B) deposit and the loan financed out of the deposit. However, the RBI has said that the bank should fix a limit on the mismatches.

The circular states that the banks will be free to decide the tenure as well as interest rates on such lendings. Bankers feel that interest rates on these loans will be pegged 200 basis points above Libor.