Banks may have to offer 100% risk weightage

NEW DELHI: Commercial banks are likely to be asked to provide 100 per cent risk weightage on guaranteed state government corporations’ securities (non-SLR) in the Credit Policy to be announced on Monday.

The Reserve Bank of India (RBI) is also expected to usher in an era of strict monitoring of the private placement market involving the commercial, cooperative and regional rural banks.

Broadly, state government securities fall under three categories: (a) state government’s direct borrowing through the RBI that currently has a risk weightage of 2.5 per cent, (b) borrowing programme of state PSUs approved by the government that too has a weightage of 2.5 per cent, and (c) the programme of those state PSUs that are beyond the approved borrowing programme. These have a weightage of 22.5 per cent.

It is this category that has seen a lot of defaults in the recent past and the RBI move is stated to check banks from getting into these portfolios. Already, many of the banks have proactively acted to the issue by deciding not to subscribe to their issue.