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Rediff.com  » Business » Panel asks RBI to direct banks to fund industry

Panel asks RBI to direct banks to fund industry

April 24, 2003 16:34 IST

A Parliamentary committee has asked Reserve Bank of India to direct banks to channelise more funds to industry and other sectors instead of investing excessively in risk-free government papers.

The standing committee on finance, headed by N Janardhana Reddy, said it was distressed to note the prevailing tendency of public-sector banks of investing more funds in G-secs and other related securities.

"It establishes that they (PSBs) are more interested in parking their money in risk free investments rather than advancing to corporate and other sectors," the committee said in its report tabled in Parliament.

Hence the committee desires that there should be cap on maximum SLR investment to be made by banks, it said, adding that stipulation of such a maximum limit would release the excess funds lying in statutory reserve for credit.

The committee strongly recommend that RBI should initiate appropriate steps in this direction immediately and issue guidelines to this effect accordingly," it said.

Noting that though banks had "adequate" liquidity, they were not coming forward to finance the industry to the extent of their capability, the panel said, "This, indeed, does not augur well for industry and commerce."

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