LARGE EXPOSURE FRAMEWORK (effective from 1/4/2019 )

LARGE EXPOSURE framework  (from 1/4/2019)

* A large exposure is defined as any exposure to a counter-party or group of counter-parties which is equal to 10 per cent of the bank’s eligible capital base (defined as tier-I capital).

*Single Counterparty: The sum of all the exposure values of a bank to a single counterpart must not be higher than 20 percent of the bank’s available eligible capital base at all times. In exceptional cases, Board of banks may allow an additional 5 percent exposure of the bank’s available eligible capital base. Banks shall lay down a Board approved policy in this regard.

*Groups of Connected Counterparties: The sum of all the exposure values of a bank to a group of connected counterparties, as defined below, must not be higher than 25 percent of the bank’s available eligible capital base at all times.

          Any breach of the above LE limits shall be under exceptional conditions only and shall be reported to RBI   immediately and rectified at the earliest but not later than a period of 30 days from the date of the breach

EXEMPTIONS FROM LEF

The exposures that will be exempted from the LEF are listed below:

a. Exposures to the Government of India and State Governments which are eligible for zero percent Risk Weight under the Basel III – Capital Regulation framework of the Reserve Bank of India;

b. Exposures to Reserve Bank of India;

c. Exposures where the principal and interest are fully guaranteed by the Government of India;

d. Exposures secured by financial instruments issued by the Government of India,

e. Intra-day interbank exposures;

f.  Intra-group exposures;

g. Borrowers, to whom limits are authorised by the Reserve Bank for food credit;

h. Banks’ clearing activities related exposures to Qualifying Central Counterparties (QCCPs)

i. Rural Infrastructure Development Fund (RIDF) deposits placed with NABARD.