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RBI issues final guidelines on large exposure framework

Sum of all the exposure values of a bank to a single counter-party must not be higher than 20% of the bank's available eligible capital base at all times, says RBI

Press Trust of India  |  Mumbai 

Photo: Kamlesh Pednekar
Photo: Kamlesh Pednekar

The on Thursday issued final norms for banks' to large companies and said lender's total advances to a single company cannot be higher than 20% of its base.

The new norms will should be implemented by March 31, 2019, said.

"The sum of all the values of a bank to a single counter-party must not be higher than 20% of the bank's available eligible base at all times," said in the final guidelines on Large Framework (LEF).

However, in exceptional cases, board of banks may allow an additional 5% of the bank's available eligible base.

"The sum of all the values of a bank to a group of connected counter-parties must not be higher than 25% of the bank's available eligible base at all times," said, adding banks must lay down a board approved policy in this regard.

The framework said any breach of the limits shall be under exceptional conditions only and shall be reported to immediately and rectified at the earliest but not later than a period of 30 days from the date of the breach.

The guidelines said banks must apply these at the same level as the risk-based requirements are applied, that is, a bank shall comply with the these norms at two levels the consolidated level and solo level.

The application of at the consolidated level implies that a bank must consider exposures of all the banking group

entities (including overseas operations through branches and subsidiaries), which are under regulatory scope of consolidation, to counter-parties and compare the aggregate of those exposures with the banking group's eligible consolidated base.

Under the proposed LEF, an to a counter-party will constitute both on and off-balance sheet exposures included in either the banking or trading book and instruments with counter-party credit risk.

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RBI issues final guidelines on large exposure framework

Sum of all the exposure values of a bank to a single counter-party must not be higher than 20% of the bank's available eligible capital base at all times, says RBI

Sum of all the exposure values of a bank to a single counter-party must not be higher than 20% of the bank's available eligible capital base at all times, says RBI
The on Thursday issued final norms for banks' to large companies and said lender's total advances to a single company cannot be higher than 20% of its base.

The new norms will should be implemented by March 31, 2019, said.

"The sum of all the values of a bank to a single counter-party must not be higher than 20% of the bank's available eligible base at all times," said in the final guidelines on Large Framework (LEF).

However, in exceptional cases, board of banks may allow an additional 5% of the bank's available eligible base.

"The sum of all the values of a bank to a group of connected counter-parties must not be higher than 25% of the bank's available eligible base at all times," said, adding banks must lay down a board approved policy in this regard.

The framework said any breach of the limits shall be under exceptional conditions only and shall be reported to immediately and rectified at the earliest but not later than a period of 30 days from the date of the breach.

The guidelines said banks must apply these at the same level as the risk-based requirements are applied, that is, a bank shall comply with the these norms at two levels the consolidated level and solo level.

The application of at the consolidated level implies that a bank must consider exposures of all the banking group

entities (including overseas operations through branches and subsidiaries), which are under regulatory scope of consolidation, to counter-parties and compare the aggregate of those exposures with the banking group's eligible consolidated base.

Under the proposed LEF, an to a counter-party will constitute both on and off-balance sheet exposures included in either the banking or trading book and instruments with counter-party credit risk.
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Business Standard
177 22

RBI issues final guidelines on large exposure framework

Sum of all the exposure values of a bank to a single counter-party must not be higher than 20% of the bank's available eligible capital base at all times, says RBI

The on Thursday issued final norms for banks' to large companies and said lender's total advances to a single company cannot be higher than 20% of its base.

The new norms will should be implemented by March 31, 2019, said.

"The sum of all the values of a bank to a single counter-party must not be higher than 20% of the bank's available eligible base at all times," said in the final guidelines on Large Framework (LEF).

However, in exceptional cases, board of banks may allow an additional 5% of the bank's available eligible base.

"The sum of all the values of a bank to a group of connected counter-parties must not be higher than 25% of the bank's available eligible base at all times," said, adding banks must lay down a board approved policy in this regard.

The framework said any breach of the limits shall be under exceptional conditions only and shall be reported to immediately and rectified at the earliest but not later than a period of 30 days from the date of the breach.

The guidelines said banks must apply these at the same level as the risk-based requirements are applied, that is, a bank shall comply with the these norms at two levels the consolidated level and solo level.

The application of at the consolidated level implies that a bank must consider exposures of all the banking group

entities (including overseas operations through branches and subsidiaries), which are under regulatory scope of consolidation, to counter-parties and compare the aggregate of those exposures with the banking group's eligible consolidated base.

Under the proposed LEF, an to a counter-party will constitute both on and off-balance sheet exposures included in either the banking or trading book and instruments with counter-party credit risk.

image
Business Standard
177 22

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