Skip to main content

Large Corporate Loans To Cost More From FY18

By
The Reserve Bank of India on Thursday said corporate loans beyond the limit set by it would cost more from financial year 2017- 18, as banks have to maintain additional provisions and high capital for such exposures.
In keeping with the corporate bond reforms, RBI also prescribed restrictions on banks taking incremental exposure on a single party, mostly corporate groups, beyond normal limits. The norms aim to curb concentration risks and enhance credit supply for large borrowers through markets.
The banking system ordinarily keeps future incremental exposures to specified borrowers within the Normally Permitted Lending Limit (NPLL), RBI said.
Exposures beyond NPLL will be deemed to carry higher risk. These will attract additional provisioning and higher risk weights, RBI said.
Banks will have to keep an additional three per cent over and above the applicable provision on incremental exposures for excess NPLL. This will be distributed in proportion to each bank’sfunded exposure to specified borrowers.
Banks will also have to keep additional risk weight of 75 percentage points over and above the applicable weight for exposure to specified borrowers.
The additional exposure for riskweighted assets ( RWA) will be distributed in proportion to each bank’s funded exposure.
Meanwhile, RBI also proposed to limit exposure of a bank to a business group to up to 25 percent of its capital, down from 55 per cent.
“Large Exposure ( LE) limits for each counterparty and group of connected counterparties, under normal circumstances, willbecappedat20per cent and 25 per cent, respectively, of the eligible capital base,” RBI said in a draft LE framework.
The eligible capital base will be defined astier- 1 capital oft he bank, as against capital funds at present, it said.
Connected large borrowing companie swill be identifiedon the basis of control as well as economic dependence criteria, it said.
Business Standard New Delhi,26th August 2016

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more