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RBI caps banks' exposure to single NBFC at 20% of capital base

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Mumbai: The Reserve Bank of India on Thursday said it has decided that a bank’s exposure to a single NBFC (excluding gold loan companies) will be restricted to 20 per cent of that bank’s eligible capital base. Bank finance to NBFCs predominantly engaged in lending against gold will continue to be governed by limits prescribed in circular, it clarified. Banks’ exposures to a single NBFC is restricted to 15 per cent of their available eligible capital base, while general single counterparty exposure limit is 20 per cent, which can be extended to 25 per cent by banks’ boards under exceptional circumstances. On August 7, while announcing its third bi-monetary policy of 2019-20, RBI had spoken about harmonisation of single counterparty exposure limit for banks’ exposure to single NBFCs with general single counterparty exposure limit. Under the revised guidelines on large exposure framework (LEF) that came into effect from April 1, 2019, a bank’s exposure to a single NBFC is restricted to 15 per cent of its Tier I capital, while for entities in the other sectors the exposure limit is, 20 percent of Tier I capital of the bank, which can be extended to 25 per cent by banks’ Boards under exceptional circumstances. “As a step towards harmonisation of the counterparty exposure limit to single NBFC with that of the general limit, it has been decided to raise a bank’s exposure limit to a single NBFC to 20 per cent of Tier-I capital of the bank,” RBI has said on August 7.




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