The removal of restrictions on banks for acquisition financing will help the real economy, Reserve Bank of India Governor Sanjay Malhotra said on Friday.Last month, the RBI allowed banks to fund acquisitions and raised the cap on loans for buying shares at IPOs, as part of a raft of measures to boost bank lending in the world’s fifth-largest economy.”These come as you are aware … with guardrails, like limiting bank funding to 70% of the deal value, limits on debt to equity ratio … which will ensure safety while allowing banks and their stakeholders to reach benefits of additional business,” the RBI chief said.
While speaking at the State Bank of India’s Banking and Economics Conclave Malhotra said no regulator can or should substitute boardroom judgement especially in a country like India where each case, each loan, each deposit, each transaction is different.”We need to allow the regulated entities to take decisions based on the merits of each case, rather than prescribing a one size fit all rule,” he added.The apex bank chief also said supervisory actions have enabled effective backstop to moderate or prune unsustainable growth and shape a robust, resilient and beautiful banking system.The RBI has ample tools, risk weights, provisioning norms, counter cyclical buffers to contain emerging risks, he added.(Edited by : Sheersh Kapoor)
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