The move was aimed at helping banks build up provisioning and capital buffers in good times so that higher profits could be used for absorbing losses during a downturn.

The country's banking regulator has advised banks to maintain 70 percent of the provision coverage ratio (PCR) of their gross bad loans as on September 2010.

However, the banks are not required to maintain 70 percent of PCR — the amount that a bank expects to forgo from a loan if they have to write off that loan account — on an ongoing basis.

Under the present provisioning norms, banks are required to maintain funds ranging from 10 percent for sub-standard assets to 100 percent for assets under 'loss category.'

Separately, the RBI has unveiled the new limits for India's federal government to borrow from the bank under Ways and Means Advances (WMA) for the 2011-12 fiscal.

WMA for the period between April 1, 2011 to April 20, 2011 will be $6.76 billion while for the period between April 21 to June 30 it will be $10.14 billion, said a source at the India's apex bank.

Similarly, WMA for the period between July 1, 2011 to Sept. 30, 2011 will be $6.76 billion and $2.25 billion for the period between Oct. 1, 2011 to March 31, 2012.

India's apex bank is likely to trigger fresh floatation of market loans when the government utilizes 75 percent of the WMA limit. It would retain the flexibility to revise the limits at any time, in consultation with the government, taking into consideration the prevailing circumstances.

The interest rate on WMA will be calculated on the basis of repo rate. For the overdraft it will be two percent above the repo rate.

At micro-level, India's central bank has begun a cheque truncation system (CTS) as pilot project in a bid to improve the efficiency of cheque clearance and reducing clearance-related frauds.

"Presently the CTS is operational at Delhi and Chennai," said RBI Deputy GovernorShyamala Gopinath, adding that it would be implemented at national-level after it was properly operational.

The CTS is an online image-based cheque clearing system where cheque images and magnetic ink character recognition (MICR) data are captured at the collecting bank branch and transmitted electronically eliminating the actual cheque movement.

Its benefits include realization of proceeds of cheque within the same day, easy data storage and retrieval, minimize risks and secured cheque clearing system, cost saving, minimizing bottlenecks and delays between presentation and realization time.

In another development, India's central bank, in its weekly statistical supplement, said that the country's foreign exchange reserves fell to $307.917 billion as of April 15 from $308.203 billion in the previous week.

Changes in foreign currency assets, expressed in dollar terms, include the effect of appreciation or depreciation of other currencies held in its reserves like the euro, sterling and yen, the central bank said.

Foreign exchange reserves include India's Reserve Tranche position in the International Monetary Fund, the central bank said.