RBI proposes tightening of bank exposure norms

Published on March 28, 2015 17:27:40 PM
The Reserve Bank of India (RBI) has proposed tightening of the norms for large exposure by lowering the ceiling on how much a bank can lend to to a single counterparty or to a group of connected counterparties.

The proposal has been made to curb risks in the banking sector, especially in the current times when bad loans are on the rise. According to the proposal, banks would only be allowed to make lendings of up to 25 percent of their available eligible capital base, much lesser than the earlier ceiling of up to 55 per cent, with affect from January 1, 2019.

The RBI gave the information in the ‘Discussion Paper on Large Exposures Framework and Enhancing Credit Supply through Market Mechanism,’ released on its website late on Friday.

The central bank has also stated that it would consider setting a minimum percentage of capital requirements that companies must raise from corporate bond and commercial paper markets, stating that the corporate sector had become too very dependent on banks for their financial requirements.