At present banks are allowed to invest up to 15 per cent of Tier I capital in oveseas money markets. Investments of nostro funds on overnight basis by banks were not included in this limit. It has come to the notice of the Reserve Bank of India that the overnight investments out of nostro funds have recently become fairly sizeable on a continuing basis. It has therefore been decided that the cap of 15 per cent permitted for overseas investments would also include overnight investments out of nostro accounts. Investments of nostro funds arising out of foreign currency accounts like Foreign Currency Non-Resident (Banks), Resident Foreign Currency, Exchange Earners' Foreign Currency Accounts, etc., will continue to be outside the limit. Banks are expected to ensure adherence to the limit by January 7, 1998.

(Alpana Killawala)
General Manager

Press Release : 1997-98/525