MUMBAI: To boost trading in bonds, RBI said it will gradually lower the ceiling on government securities that can be held-to-maturity (HTM) by banks to 22 per cent, from 24 per cent, beginning January.

The apex bank also announced it will extend the period that foreign investors can settle their over-the-counter government bonds to two days of their trade from one. The measure, traders said, could be aimed at facilitating the settlement of debt in the Euroclear platform to which India is planning to join soon.

Announcing the monetary policy, the central bank said it will cut the ceiling on HTM bonds from the current 24 per cent to 22 per cent in stages, starting in the two-week cycle from January 10, 2015.

Commenting on this, SBI Chairperson Arundhati Bhattacharya said the calibrated cut in HTM ceiling to 22 per cent by September 15 is a welcome and non-disruptive move.

Bank of India head V R Iyer said: "The guidelines for cut in HTM, spread over one year beginning January 2015, are a welcome step as it removes uncertainty on this issue. Banks can now better plan dilution from HTM."

Federal Bank MD Shyam Srinivasan said the move to bring down the ceiling on SLR securities under the HTM category will deepen the bond market.

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