The Reserve Bank of India's (RBI) has finally come to the banking sector's rescue. The central bank has come up with norms that would ease the pressure on the banks' investment portfolios. One measure is to allow banks to shift some of their bonds to the HTM (Held to maturity) category. This is an accounting technique by which the banks would no longer be required to report mark to market losses on this part of the portfolio at least. The RBI has also allowed banks to retain their SLR holding in the HTM category at 24.5%. Earlier it had planned to reduce this percentage. So these measures would help the banks' bottom line to some extent albeit only because of accounting changes.

The bigger relief for the market is that RBI has announced measures to infuse more liquidity in the market. This should bode well for the corporate world which has seen its investment plans come under pressure due to the monetary tightening by RBI. But the question is whether these measures are sufficient to kick start the slowing investment cycle? We think not. The measures provided by RBI do come as a relief but the relief is only temporary. For long term relief the government still needs to remove the structural roadblocks. The RBI has done its job and is still doing it. Now it's time for the government to do the same.