RBI to permit banks, FIs to grant loan against CDs of MFs

Mumbai, Oct 14 (UNI) In furtherance of a slew of measures it has announced to ease liquidity crisis in the country, the Reserve Bank of India (RBI) today relaxed restrictions on lending and buying back of Certificate of Deposit issued by banks and financial institutions.

In a circular here, the Apex Bank however said that the relaxation of restrictions issued on July one would be for a period of 15 days and would be only in respect of CDs held by Mutual Funds.

Under the guidelines for Issue of Certificates of Deposits, banks and FIs were not permitted to grant loans against CDs. Furthermore, they were also not permitted to buy-back their own CDs before maturity.

While granting such loans to the mutual funds, the banks should keep in view the provisions of the SEBI (Mutual Funds) Regulations, 1996. Further, such finance, if extended to equity-oriented mutual funds, would form part of banks' capital market exposure, as hitherto, the circular said.

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