RBI gives flexibility to banks for equity investment

Mumbai: Giving more flexibility, the Reserve Bank on Wednesday allowed banks to invest in equities of financial service ventures including stock exchanges and depositories without any prior approval.

The RBI said the investment flexibility will be limited to banks that have capital adequacy ratio (CRAR) of 10 percent or more and also made net profit in the previous fiscal.

"To give more operational freedom and flexibility in decision making, it is advised that banks which have CRAR of 10 percent or more and have also made net profit as of March 31 of the previous year need not approach the RBI for prior approval for equity investments (in financial services companies)...," it said.

While making such investments banks will have to adhere to other conditions, which include limit on holding in investee company.

Earlier banks were required to get a prior approval of the RBI for such investments which are subject to prudential limits.