Hinting at tightening banks’ single group exposure cap from current 40 per cent, RBI on Thursday said it would be reviewing this credit limit to gradually align it with the global group exposure practices and mitigate risks.
It also said that the priority sector lending guidelines have not kept pace with the changing economic priorities, and promised a review of the same during the year.“Our current exposure limits to a group of borrowers is much higher at 40 per cent of capital funds (plus 10 per cent for infrastructure finance). It is proposed to review the exposure norms in 2014-15,” the central bank said in its annual report.
It said the BCBS (Basel Committee on Banking Supervision), has set the ‘single’ and ‘group of counter-parties’ limit at 25 per cent of the tier-I capital of a bank, adding that its intention is to bring the Indian limit at par with the global practices gradually.In a new addition, the RBI came up with a new section on ‘Vision and Agenda’ for the upcoming year, in the annual report wherein it has made these pronouncements.
“The tightening of exposure norms will also help in risk mitigation during cyclical downturns as banks’ exposure under the framework will be more granular and diversified to a large number of unrelated counter-parties rather than being concentrated in a handful of large and related counter- parties,” it said.