RBI eases capital norms on ECLGS 5.0 loans with lower risk weight

The central bank has allowed a zero-risk weight on a large portion of ECLGS 5.0-guaranteed loans, reducing capital requirements for lenders under the scheme

The Reserve Bank of India (RBI) has allowed lenders to assign a zero-risk weight to a significant portion of loans guaranteed under the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, reducing capital requirements and potentially supporting credit growth under the programme.

 

The RBI said exposures under ECLGS 5.0 would attract a zero per cent risk weight for up to 75 per cent of the guaranteed portion, where settlement is expected within 30 days of guarantee invocation. The balance exposure will continue to be risk-weighted under existing norms.

 

Risk weights determine the amount of capital banks must hold against loans.