RBI Releases Paper on Wholesale, Long-term Finance Banks
The Reserve Bank of India on Friday released a discussion paper on a proposal to set up "differentiated banks" in the form of wholesale and long-term finance banks to fund large projects.
The Reserve Bank of India (RBI) seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. (Photo: REUTERS)
Mumbai: The Reserve Bank of India on Friday released a discussion paper on a proposal to set up "differentiated banks" in the form of wholesale and long-term finance banks to fund large projects.
The new banks will focus on lending long-term and cater to the funding needs of sectors such as infrastructure and core industries, where projects take longer to complete, the Reserve Bank of India stated in the discussion paper.
Last year in April, the RBI had said it would explore possibility of setting up more differentiated banks, including those concentrating on wholesale and long-term financing.
Banks account for most of India's project funding in the absence of a deep bond market. Due to asset quality pressure on the banks' balance sheets, there is an overall declining trend in bank credit to sectors including services and industries, the RBI said, adding there had been a decline in the share of banks' long-term assets with maturity of more than three years.
The new banks can also act as market-makers in securities such as corporate bonds, credit derivatives, warehouse receipts, and take-out financing, the RBI said. They would also provide refinance to lending institutions and will be present in capital markets in the form of aggregators, it said.
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