Finance Minister P Chidambaram, moving in a pincer attack with the Reserve Bank of India (RBI) to ward off an economic slowdown, on Wednesday doubled the ceiling on foreign institutional investor (FII) investment in corporate bonds to $6 billion, opening up a new avenue to strengthen resources to sustain growth and investment in the economy.
While recession fears loomed across the world, the government also formally announced an expected Rs. 25,000 crore extension to banks to meet requirements under the waiver of farm loans announced earlier this year.
Alongside, the minister also announced steps to strengthen the capital requirements of banks, though they are already meeting global standards and not in crisis, unlike many Western banks. “The money (for farm loan waiver) will be made available to the commercial banks (Rs.7,500 crore) and to National Bank for Agriculture and Rural Development or Nabard (Rs.17,500 crore),” he said.
Observing that India’s banks are well capitalised, Chidambaram said their capital to risk-weighted assets ratios (CRAR) were well above the 8 per cent norm set by the Switzerland-based Bank of International Settlements and RBI’s norm, even higher at 9 per cent. “No bank has a capital adequacy of less than 10 per cent,” he said.