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Banks plan to revise FII real estate investment norms
The finance ministry has urged the Reserve Bank of India (RBI) to reexamine norms governing derivatives exposure of banks to contain adverse impact on the Indian banking sector due to the ongoing financial crisis in the US. A meeting of top public sector banks is also likely to be called to assess the situation. The finance ministry wants RBI to revise the real estate investment norms for foreign investment investors (FIIs) as there are apprehensions that foreign fund flows for these projects could dry up in the light of the Lehman collapse, Merrill Lynch takeover and the AIG bailout.
Top finance ministry officials have spoken to the chiefs of top public sector banks. An emergency meeting of the chief executives of some large public sector banks including State Bank of India (SBI), Punjab National Bank (PNB), Canara Bank and Bank of India (BoI) is expected soon. The meeting might take place in a couple of days. “We have written to the RBI asking them to examine the situation and suggest the follow-on course of action to minimise the losses that may arise from the present debacle,” an official in the finance ministry said. The government is worried the ongoing crisis would have an adverse impact on Indian banks. Lehman Brothers and Merrill Lynch had invested substantially in the stocks of Indian banks. The banks, in turn, have invested in derivatives which might have exposure to these investment bankers.
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