The Reserve Bank of India (RBI) has opposed a government plan under which public sector banks will lend money to a new asset management company (AMC), which, in turn, will buy stakes in state-owned enterprises to support the faltering disinvestment programme. According to sources, the central bank has rejected this proposal as it would expose banks to undue market risk and violate capital market exposure limits on banks set by the central bank.As per the finance ministry proposal, the AMC is to be created by transferring government ownership in three companies — L&T, ITC and Axis Bank — held through Special Undertaking of UTI, (SUUTI) valued roughly at R32,000 crore. The AMC will then borrow from banks on the strength of these underlying assets and invest borrowed funds in PSUs being disinvested.
Source: Financial Express
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