[MUMBAI] India's central bank allowed lenders to sell long-term bonds exempted from reserve requirements to boost funding for infrastructure and affordable housing.
The rupee-denominated bonds will have a minimum maturity of seven years and will be free from cash reserve and statutory liquidity ratio requirements, as well as so-called priority sector lending targets, the Mumbai-based Reserve Bank of India (RBI) said on Tuesday.
Prime Minister Narendra Modi, in his first budget presented last week, pledged US$25 billion to boost spending on developing the nation's infrastructure, including highways, power plants, ports and housing. Loans for so-called priority housing rose 9 per cent in the year to May 30 from a year earlier, compared with a 29 per cent increase in home financing excluding priority lending, RBI statistics show.
"Exemptions on reserves give banks access to funds at comparatively cheaper rates," M Narendra, chairman and managing director of Chennai-based Indian Overseas Bank, said on Tuesday. "We are planning to raise funds through this avenue to finance existing infrastructure loan book and to do incremental lending."