RBI released draft circular on the limits on exposure to single and group borrowers/parties and large exposures and on the revisions to priority sector lending targets for primary (urban) co-operative banks (UCBs). RBI has reviewed the single or group exposure limits of UCBs and has decided to rationalize the single or group exposure limits for UCBs, in an effort to contain the concentration risk. Comments on the draft circular were requested by January 20, 2020.
The circular stipulates that the prudential exposure limits for UCBs for a single borrower/party and a group of connected borrowers/parties shall be 10% and 25%, respectively, of their Tier I capital. The revised exposure limits shall apply to all types of fresh exposures taken by UCBs. The UCBs shall bring down their existing exposures that are in excess of the revised limits to within the aforesaid revised limits by March 31, 2023. However, where the existing exposure comprises only term loans and non-fund-based facilities, while no further exposure shall be taken on such borrowers, these facilities may be allowed to continue as per their respective repayment schedule or till maturity.
The circular also states that UCBs shall have at least 50% of their loan portfolio comprising loans of not more than INR 25 lakh per borrower/party. The circular further stipulates that the target for loans and advances to priority sector for UCBs shall stand increased to 75% of adjusted net bank credit or credit equivalent amount of off-balance sheet exposure, whichever is higher, by March 31, 2023. An appropriate glide path is proposed to be provided to UCBs for compliance with the aforesaid norms/limits/targets. UCBs shall prepare, with the approval of their Board, an action plan for compliance with the revised exposure norms/limits and priority sector lending targets.
Comment Due Date: January 20, 2020
Keywords: Asia Pacific, India, Banking, Concentration Risk, Large Exposures, Exposure Limits, Cooperative Banks, Credit Risk, RBI
Previous ArticleECB Publishes Release 5.0 of BIRD Database
HKMA has published a circular that sets out the regulatory and reporting treatment for loans that participating authorized institutions may grant to eligible borrowers under the 100% Personal Loan Guarantee Scheme.
ECB published the results of the assessment of internal models that banks use to calculate risk-weighted assets for credit, market, and counterparty credit risks.
PRA published a statement on the regulatory treatment of retail residential mortgage loans under the Mortgage Guarantee Scheme, or MGS.
FCA is consulting, via CP21/7, on the second phase of proposed rules to introduce the UK Investment Firm Prudential Regime (IFPR).
HM Treasury and BoE announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential central bank digital currency in UK.
EIOPA published an opinion to set out its expectations on the supervision of the integration of climate change risk scenarios by insurers in their Own Risk and Solvency Assessment (ORSA).
Bundesbank published two circulars on AnaCredit reporting requirements. Circular 27/2021 covers changes to the reporting of branches, additional attributes to be reported for investment funds from August 01, 2021, and updates to the list of international organizations.
EC published the Implementing Regulation 2021/622 that lays down implementing technical standards for reporting of the minimum requirement for own funds and eligible liabilities (MREL).
BCBS has set out the strategic work priorities, as part of its the work program for 2021-22.
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.