1) Limit on total investment in shares:
In terms of Para 1-B (a) of Regulation 6 of the Prudential
Regulations for Corporate/Commercial Banking, total
investment of banks in shares should not exceed 20%
of their equity whereas in the case of Islamic banks
and DFIs mobilizing deposits, the total investment should
not exceed 35% of their equity. Furthermore, as per
Para 1-B (b) the exposure of banks and DFIs in future
contracts should not exceed 10% of their equity.
It
has been decided to allow the banks/DFIs to combine
the two limits provided in Para 1-B (a) and Para 1-B
(b) of the Prudential Regulation 6 for ready market
and future contracts and have the aggregate exposure
in shares to the extent of 30% of their equity (in case
of Islamic Banks/DFIs upto 45% of their equity) provided
that investment in future contracts shall not exceed
10% of their equity.
2)
Minimum Margin Requirement on exposure against shares:
In terms of Para 3 of the Prudential Regulation 6 of
Prudential Regulations for Corporate/Commercial Banking,
banks/DFIs are required to maintain a minimum margin
of 30% of current market value while lending against
shares.
It
has been decided to allow the banks/DFIs to continue
to maintain a minimum margin of 30% on their lending
against shares; however, they should not give a margin
call until the margin reaches to the level of 25%.
