RBI Amends Basel III Rule on Risk-Weights for Rated Exposures to NBFCs
RBI has decided that exposures to all non-banking financial companies (NBFCs), excluding the core investment companies (CICs), will be risk-weighted as per the ratings assigned by the rating agencies registered with the Securities and Exchange Board of India (SEBI) and accredited by RBI. This has been done with a view to facilitate flow of credit to well-rated NBFCs and will be done in a manner similar to that of corporates.
This requirement refers to guidance as prescribed under paragraph 5.8.1 of the Master Circular DBR.No.BP.BC.1/21.06.201/2015-16 dated July 01, 2015 on Basel III Capital Regulations, which is to be read in conjunction with the Circular DBR.No.BP.BC.6/21.06.001/2016-17 dated August 25, 2016 on “Review of Prudential Norms—Risk Weights for Exposures to Corporates, Asset Finance Companies (AFCs) and NBFC-IFCs [Infrastructure Finance Companies]” and Mailbox Clarification dated December 29, 2017. However, exposures to CICs, rated as well as unrated, will continue to be risk-weighted at 100%. At present, under the existing guidelines on Basel III capital regulations, exposures/claims of banks on rated as well as unrated non-deposit-taking systemically important non-banking financial companies (NBFC-ND-SI), other than AFCs, NBFCs-IFCs, and NBFC-IDF [Infrastructure Development Funds], have to be uniformly risk-weighted at 100%. Exposures to AFCs, NBFCs-IFC, NBFCs-IDF, and other NBFCs that are not NBFC-ND-SI are risk-weighted as per the ratings assigned by the rating agencies accredited by RBI.
Keywords: Asia Pacific, India, Banking, Basel III, Capital Regulations, Risk Weights, NBFC, Rated Exposures, Credit Ratings, RBI
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Related Articles
US Agencies Finalize Interim Final Rules Issued Amid Pandemic
US Agencies (FDIC, FED, and OCC) finalized two rules, which are either identical or substantially similar to the interim final rules in effect and issued earlier this year.
EIOPA Consults on Use of Risk Mitigation Techniques Under Solvency II
EIOPA is consulting on a supervisory statement on the use of risk mitigation techniques by insurance and reinsurance undertakings.
APRA Proposes to Increase Transparency of Banking Data
APRA announced that it is resuming consultation on the confidentiality of data submitted to APRA by the authorized deposit-taking institutions.
BoE and FCA Encourage Switch to SONIA in Interest Rate Swap Markets
BoE and FCA are supporting and encouraging liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on SONIA, instead of LIBOR, from October 27, 2020.
Bundesbank Updates Supporting Information for SHS Reporting
Deutsche Bundesbank published special schema files for securities holdings statistics (SHS), along with a document on the XML format description.
EC Deems UK Framework for CCPs Temporarily Equivalent to EMIR Rules
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
ESMA to Recognize Three Central Counterparties from UK
ESMA announced that it will recognize three central counterparties (CCPs) established in the UK as third-country CCPs, from January 01, 2021.
PRA Publishes Version 02.04 of PRA110 Liquidity Metric Monitor Tool
PRA published Version 02.04 of the PRA110 liquidity metric monitoring tool (PRA110 LMM tool).
LEI ROC Confirmed as Governance Body for OTC Derivatives Identifiers
FSB confirmed the Regulatory Oversight Committee (ROC) of the Global Legal Entity Identifier System (GLEIS) as the International Governance Body for the globally harmonized identifiers used to track over-the-counter (OTC) derivatives transactions, with effect from October 01, 2020.
FCA Consults on Regulation of International Firms in UK
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.
