Off-balance sheet items
Off-balance sheet items have been bifurcated as follows:
(iii) Non-market related off-balance sheet items
(iv) Market related off-balance sheet items
There is two-step process for the purpose of calculating risk weighted assets in respect of
off-balance sheet items:
BI. The notional amount of the transaction is converted into a credit equivalent factor by
multiplying the amount by the specified Credit Conversion Factor (CCF)
The resulting credit equivalent amount is then multiplied by the risk weight
applicable to the counter party or to the purpose for which the bank has extended
finance or the type of asset whichever is higher. Where the off-balance sheet item is secured by eligible collateral or guarantee, the credit
risk mitigation guidelines will be applied. Non-market related off-balance sheet items:
Off balance sheet items like direct credit substitutes, trade and performance related
contingent items and commitments with certain draw downs are classified under Non- market related off-balance sheet items. The credit equivalent amount is determined by
multiplying the contracted amount of that particular transaction by the relevant CCF. Non-market related off-balance sheet items also include undrawn or partially
undrawn fund based and non-fund based facilities, which are not unconditionally
cancellable. The amount of undrawn commitment is to be included in calculating the off balance sheet items. Non-market related exposure is the maximum unused portion of the
commitment that could be drawn during the remaining period of maturity. In case of term
loan with respect to large project to be drawn in stages, undrawn portion shall be calculated
with respect of the running stage only. RBI guidelines on CCF (Credit Conversion Factor)
Direct Credit Substitutes CCF
General Guarantees (including Standby LCs), 100%
Acceptances
Transaction related contingent items (Performance 50%
bonds, Bid bonds, Warranties, Indemnities, Standby
LC relating to particular transaction
Short Term LC (Documentary) for Issuing bank as well 20%
as confirming bank
https://iibfadda.blogspot.com. /?m=0
Off-balance sheet items have been bifurcated as follows:
(iii) Non-market related off-balance sheet items
(iv) Market related off-balance sheet items
There is two-step process for the purpose of calculating risk weighted assets in respect of
off-balance sheet items:
BI. The notional amount of the transaction is converted into a credit equivalent factor by
multiplying the amount by the specified Credit Conversion Factor (CCF)
The resulting credit equivalent amount is then multiplied by the risk weight
applicable to the counter party or to the purpose for which the bank has extended
finance or the type of asset whichever is higher. Where the off-balance sheet item is secured by eligible collateral or guarantee, the credit
risk mitigation guidelines will be applied. Non-market related off-balance sheet items:
Off balance sheet items like direct credit substitutes, trade and performance related
contingent items and commitments with certain draw downs are classified under Non- market related off-balance sheet items. The credit equivalent amount is determined by
multiplying the contracted amount of that particular transaction by the relevant CCF. Non-market related off-balance sheet items also include undrawn or partially
undrawn fund based and non-fund based facilities, which are not unconditionally
cancellable. The amount of undrawn commitment is to be included in calculating the off balance sheet items. Non-market related exposure is the maximum unused portion of the
commitment that could be drawn during the remaining period of maturity. In case of term
loan with respect to large project to be drawn in stages, undrawn portion shall be calculated
with respect of the running stage only. RBI guidelines on CCF (Credit Conversion Factor)
Direct Credit Substitutes CCF
General Guarantees (including Standby LCs), 100%
Acceptances
Transaction related contingent items (Performance 50%
bonds, Bid bonds, Warranties, Indemnities, Standby
LC relating to particular transaction
Short Term LC (Documentary) for Issuing bank as well 20%
as confirming bank
https://iibfadda.blogspot.com. /?m=0
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