The Reserve Bank of India (RBI) has told bankers that it will relax the 25 per cent ceiling on classifying bonds in the held-to-maturity (HTM) category if the investment is in infrastructure bonds issued by companies. Bonds that are in the HTM category do not have to be marked-to-market.
“With no fear of erosion in the market value of HTM bonds, banks will be encouraged to invest in these papers,” said a banker.
In the Annual Policy Statement yesterday, RBI allowed banks to classify their investment in non-statutory liquidity ratio (SLR) bonds issued by infrastructure companies, which have a minimum residual maturity of seven years, in the HTM category.
During RBI Governor D Subbarao’s post-policy meeting with bank chiefs, the issue came up for discussion again. Bankers sought clarification on whether infrastructure bonds were within the 25 per cent ceiling. Three public sector bank chiefs said RBI concurred with the view that the ceiling could be relaxed provided the investment was in infrastructure bonds.
RBI has also clarified that bonds issued by infrastructure finance companies will not be eligible for the benefits.
Banks have been seeking relaxation in the HTM ceiling since the second half of 2009-10. With high government borrowings, the lenders had run out of the option of classifying new bonds acquired by them in the HTM category.
As a result, they had to hold the papers in the available-for-sale (AFS) segment, where the value of bonds has to be linked to the market price.
RBI had, however, turned down the plea to raise the HTM ceiling beyond 25 per cent. The relaxation will be available if the infrastructure bond has a maturity of seven years or more.
The move will benefit pure-play infrastructure players such as GMR and GVK, among others, who are raising long-term funds to finance projects.
