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06 Jul 2011 12:00 AM
RBI extends the period for banks to reduce their investments in debt funds 
A Staff Writer
 

Earlier RBI had given banks deadline till October to cap their investment in liquid schemes to 10 per cent

Mumbai: RBI has extended the period by three more months for banks to cap their investments in short-term debt and liquid funds to 10 per cent of their net worth. Earlier, banks were supposed to wrap-up the process by October but now they can do so by January.

According to a RBI notification, banks will have to pull out nearly Rs 1 lakh crore from debt schemes of mutual funds by January as the banks have to comply with this requirement not later than six months from July 5.

The notification also states that the total investment by banks in liquid/short term debt schemes (by whatever name called) of mutual funds with weighted average maturity of portfolio of not more than one year will be subject to a prudential cap of 10 per cent of their net worth as on March 31 of the previous year. The weighted average maturity would be calculated as average of the remaining period of maturity of securities weighted by the sums invested.

 
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