The central bank had earlier directed banks to maintain a 100 per cent risk- weightage on open foreign-exchange positions from March 31, 1999. This is line with the Narasimham committee's recommendation.

The new rule will force public-sector banks like State Bank, Corporation Bank, Bank of India, Bank of Baroda and foreign banks like ABN-Amro Bank, Bank of Nova Scotia and StanChart to maintain the set risk weightage. The Reserve Bank had recently decided to allow the banks into gold trading.

In a circular dated October 31, the Reserve Bank advised banks to change the calculation of the capital risk asset ratio."According to the existing practice, the ratio is calculated separately for open-position limits in forex and gold deducted from Tier-I capital. It is advised thatrisk weights for both foreign-exchange and open-gold positions limits should be added to the other risk-weighted assets for calculation of the ratio," the Reserve Bank directive said.

The central bank has come out with a detailed timetable for reduction in the time frame for substandard assets. It has said the provisioning of not less than 50 per cent on assets that have become doubtful on account of the new norms will have to be made by March 31, 2001, while the balance not made during the previous year in addition to the provisions needed will have to be made by March 31, 2002.

While announcing the mid-term credit policy, the governor said in order to move closer to international practices on provision norms, it has been decided that an asset should be classified as doubtful, if it has remained in the substandard category for 18 months instead of the current 24 months, by March 31, 2001. Banks said the new norms would force banks to raise capital to stay afloat.

The central bank has also said thatthe public financial insititutions guarantees to the bonds of corporates will be treated as an exposure to the extent of 50 per cent being a non-fund facility, whereas the exposure of the bank on the public financial institutions' guaranteeing the corporate bond will be 100 per cent.

Institutions whose bonds or debentures would qualify for a 20 per cent risk weightage for the ratio are ICICI, IDBI, IFCI, Tourism Finance Corporation of India, Risk Capital and Technology Finance Corporation, Technology Development and Information Company, Power Finance Corporation, NHB, Sidbi, Rural Electrification Corporation, IRFC, Nabard, Exim Bank and IDFC.