The Reserve Bank of India on Saturday asked banks to hike margins from 40 to 50 per cent with immediate effect on advances against shares, financing of initial public offerings and guarantees to control their exposure to capital market.
The banks should also raise the minimum cash margins for the guarantees issued for capital market operations from 20 per cent to 25 per cent, an RBI release said in Mumbai.
According to analysts the increase in the margins follows the surge in the stock market activity in recent times with the Sensex hurtling past the 6,000 mark.
The 50 per cent margin would apply to fresh advances and guarantees issued for capital market operations.
The existing advances and guarantees may continue at the earlier margins until they come up for renewal, the release added.