India's central bank seeks to boost stock markets

Tuesday, 18 May 2004, 19:30 IST
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MUMBAI: In a bid to boost share markets, India's central bank Tuesday reduced the margin money that banks have to keep for financing shares, public offers and underwriting guarantees to 40 percent from 50 percent. Presenting the central bank's annual monetary policy for the current fiscal, Reserve Bank of India (RBI) Governor Y.V. Reddy also reduced the minimum cash margin within the overall margin to 25 percent from the current 20 percent. The decision was taken on the recommendation by the task force constituted for monitoring the developments in the financial markets, an RBI statement said. "At this moment, knowing the state of affairs in the capital markets, the central bank's move is definitely a plus," Dhirendra Kumar, managing director of Value Research, said. "It will benefit when there is a flurry of activity in the IPO (initial public offer) market. Till then the impact will not be that significant," he told IANS. The decision was made on the recommendation of the task force constituted for monitoring developments in the financial market following Monday's stock market crash, the central bank said in a statement. The margins against shares were increased from the level of 40 per cent to 50 per cent in January 2004, the statement added.
Source: IANS
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