Concerned over “very high” exposure of banks to some large corporates, RBI on Thursday proposed tighter norms to mitigate the risk posed to the banking system on account of large aggregate lending to a single borrower.
The framework has been proposed to be introduced from 2017-18 onwards and the banking system should ordinarily keep its future incremental exposure to specified borrowers within the normally-permitted lending limit (NPll), RBI said.
“From 2017-18 onwards, incremental exposure of the banking system to a specified borrower beyond NPll shall be deemed to carry higher risk which shall be recognised by way of additional standard asset provisioning and higher risk weights,” read the proposal.