RBI plans to tighten rules for large corporate borrowers

The central bank released a discussion paper on the framework for enhancing credit supply to large borrowers; move to help mitigate risks for banks lending to a single corporate

Indian banks would have to make higher provisions for lending to large corporate borrowers above a certain level from next financial year, according to proposals published by the Reserve Bank of India (RBI) on Thursday.

The proposals were set out by the central bank in a discussion paper and aimed at "mitigating the risk posed to the banking system on account of large aggregate lending to a single corporate", according to the document.

"Absence of an overarching ceiling on total bank borrowing by a corporate entity from the banking system has resulted in banks collectively having very high exposures to some of the large corporates," it said.

 

The framework would come into effect in the financial year beginning April 2017, and apply to all banks in India as well as branches of Indian banks abroad, the RBI said.