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
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