Mumbai: Reserve Bank Deputy Governor HR Khan today indicated there was no move at present to give SLR status to corporate bonds.
"We had a meeting with the Finance Minister (P Chidambaram) recently. But, I think, nobody is serious about giving SLR status to corporate bonds," Khan told reporters on the sidelines of an RBI-ADB summit here.
Under the SLR (Statutory Liquidity Ratio), banks have to invest a certain part of their deposits in government bonds or any such instrument approved by the RBI. Currently, the SLR stands at 23 percent.
There have been reports in a section of the media that the North Block is planning to allow banks to hold higher amount of papers from top-rated companies and treat them as their SLR holdings in a bid to give a boost to the nascent corporate bond market.
The move comes in the wake of proposed expenditure of a whopping $1 trillion into various infrastructure projects like airports, ports, highways, roads and rail during the 12th Plan period.
When asked whether RBI is planning to build up the forex reserves that have gone down over the past one year due to rupee fall, higher imports and lower exports, Khan said the central bank did not have a deliberate policy on building up forex reserves.
The forex reserves have fallen to a little over $294 billion as of November 9, which can cover imports for seven months, as trade deficit ballooned by a record $21 billion in October, a 12-year high.
"In our context, we have no deliberate policy of building reserves. Reserves are an offshoot of what we do to take care of excessive volatility and we have no target and band on sight. So, we don't build up forex reserves," Khan said.
He, however, said the central bank takes into account the liquidity risks the country faces in the short-to medium-horizon. "We internally assess over short and medium horizons depending on both moderate and extreme scenarios. We take into consideration market value of FII investments, FDI, NRI deposits, short-term debts... all these factors are taken into consideration," Khan said adding the country prefers equity from foreign investors to debt.
On capital account liberalisation, he said the country is following an approach of gradual opening of capital account. Khan also pointed out that the country is slowly promoting bilateral trade in local currencies to reduce dependence on dollar or euro.
"We are looking at more and more opportunities towards this (use of local currencies in trade)... so that excessive dependence on one or two currencies is reduced. Of course, this is a work in progress," Khan said, adding trade balance is an important parameter for promoting trade through local currencies.
Published Date: Nov 20, 2012 06:53 pm | Updated Date: Dec 20, 2014 08:26 pm