Large exposures framework: Basel committee lauds RBI on strict rules

The Reserve Bank of India’s (RBI) rules on large exposures framework (LEF) are stricter than what the Basel committee recommends, according to a regulatory consistency assessment programme (RCAP) conducted by the Basel committee on banking supervision.

In India, the LEF applies to all banks, apart from the regional rural banks. 

According to the RBI norms, the total exposure of a bank to a single entity should not be more than 20 per cent of the Tier- 1 capital. the Basel norms, considered the benchmark, suggest exposure of up to 25 per cent to a single entity. 

“Overall, as of 7 June 2019, the large exposures regulations in India are assessed as Compliant with the Basel large exposures framework. This is highest possible grade,” the RCAP report said. 

“In some other respects, the Indian regulations are stricter than the Basel large exposures framework. For example, banks’ exposures to global systemically important banks are subject to stricter limits, in line with the letter and spirit of the Basel Guidelines, and the scope of application of the Indian standards is wider than just the internationally active banks covered by the Basel framework,” the report said.