Chennai, Dec 1 (IANS) The Reserve Bank of India (RBI) on Thursday capped loan exposure of banks to an corporate entity at 20 per cent and to a group at 25 per cent of the bank’s available eligible capital base.
In a notification, the RBI said the sum of all exposure values or loans to a single entity must not be higher than 20 per cent of the bank’s available eligible capital base at all times.
“In exceptional cases, board of banks may allow an additional 5 percent exposure of the bank’s available eligible capital base. Banks shall lay down a board approved policy in this regard,” it said.
In the case of a group of companies, a bank’s total exposure must not be higher than 25 per cent of the available eligible capital base at all times.
According to RBI, a bank’s exposure includes both on and off-balance sheet exposures included in either the banking or trading book and instruments with counterparty credit risk.
The eligible capital base for this purpose is the effective amount of Tier 1 capital.
According to RBI, any breach of the large exposure limits will be under exceptional conditions only, reported to it immediately and rectified at the earliest but not later than a period of 30 days from the date of the breach.