RBI eases accounting rules on infra bonds

MUMBAI - The Reserve Bank of India (RBI) on Friday took measures to encourage investment by local banks in bonds sold by local infrastructure firms and boost demand for debt to fund new projects.

The RBI said any investment by banks in long-maturity bonds sold by infrastructure companies and within a minimum residual maturity of seven years can be classified under the held-to-maturity category (HTM) category.

Banks are allowed to include up to 25 percent of their investments in the HTM category, exempting them from being marked to market - meaning losses on them do no need to be booked at the end of the financial year.

Last month finance minister Pranab Mukherjee urged a doubling of infrastructure spending to $1 trillion in the five years to 2016/17.

In a separate notification, the central bank removed ceilings on interest rates on rupee export credits, in a move to deregulate banks' interest rates and align them with a new base rate effective from July 1.

It removed the ceilings on interest rates on pre-shipment rupee export credit of up to 270 days and post-shipment rupee export credit of up to 180 days.

The RBI also made it easier for banks to invest in corporate bonds, which are not listed on stock exchanges at the time of their sale.

The central bank said investment of banks in bonds that are due to be listed would be considered the same as investing in a listed security.