April 01, 2019

RBI released a circular on the guidelines on large exposures framework for banks in India. The large exposures framework became effective from April 01, 2019. Banks must apply the large exposures framework at both the consolidated (Group) and solo levels.

According to the circular, after due consideration of the representations received from stakeholders, it has been decided as under:

  • Non-centrally cleared derivatives exposures will be outside the purview of exposure limits until April 01, 2020. However, banks must compute these exposures separately and report to the Department of Banking Regulation on quarterly basis.
  • For the purpose of reckoning exposure limits under large exposures framework, an Indian branch of a foreign global systemically important banks (G-SIB) will be considered as any other Indian bank and can accordingly take exposure up to 25% of its tier I capital on another non-GSIB in India.
  • The interbank exposure limit of an Indian branch of a foreign G-SIB with its Head Office will be 20% of its tier I capital in India.
  • The eligible capital base for the purpose of large exposures framework will be the effective amount of tier 1 capital fulfilling the criteria defined in the "Master Circular on Basel III – Capital Regulation" dated July 01, 2015 (as amended from time to time) as per the last audited balance sheet. However, the infusion of capital under tier I after the published balance sheet date may also be taken into account for the purpose of large exposures framework. Banks shall obtain an external auditor’s certificate on completion of the augmentation of capital and submit the same to RBI (Department of Banking Supervision) before reckoning the additions to capital funds.
  • For Indian banks, profits accrued during the year, subject to provisions contained in para 4.2.3.1 (vii) of "Master Circular on Basel III – Capital Regulation," will also be reckoned as tier I capital for the purpose of large exposures framework.
  • No additional time shall be given to banks that are in breach of specified interbank limits with other banks or with their Head Offices, to bring their exposures within limit.

To align the exposure norms for Indian banks with the BCBS standards, and based on comments and feedback received on the discussion paper on the large exposures framework, a draft large exposures framework was issued on August 25, 2016 for public comments. After examining the comments/feedback received from stakeholders on the draft proposals, final guidelines were issued in December 2016, with  April 01, 2019 being the effective date.

 

Effective Date: April 01, 2019

Keywords: Asia Pacific, India, Banking, Large Exposures, G-SIB, Tier 1 Capital, Basel III, Regulatory Capital, Credit Risk, Concentration Risk, RBI

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

PRA Consults on Maintenance of TMTP Under Solvency II

PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II.

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS published a consultation paper that proposes to consolidate the regulation of merchant banks under the Banking Act and to move merchant banks to a licensing regime under the MAS Act.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3118