What changed
The 2007 master circular replaces the July 2006 version, incorporating all instructions issued up to June 30, 2007. It consolidates exposure norms for FIs including Exim Bank, IFCI, IIBI, NABARD, NHB, SIDBI, and TFCI. No new substantive changes were introduced; it is an update and consolidation exercise.
What it means for you
Banks and FIs must continue to adhere to the existing exposure ceilings for single and group borrowers as a prudential measure to avoid credit concentration. Refinancing institutions retain exemption for their core refinance operations but are encouraged to set board-approved internal limits. Compliance with reporting and disclosure requirements remains mandatory.
What you must do
- Review and ensure compliance with single and group borrower exposure ceilings as per the master circular.
- For refinancing institutions, set board-approved internal exposure limits for refinance portfolios if not already done.
- Exclude exposures fully guaranteed by Government of India when computing borrower/group limits.
- Report any excess exposures to the Board and take corrective action within prescribed timelines.
Who it affects
All-India term-lending institutions (Exim Bank, IFCI, IIBI, TFCI), Refinancing institutions (NABARD, NHB, SIDBI), Banks and financial institutions dealing with these FIs
Are refinancing institutions like NABARD and NHB fully exempt from exposure norms?
No, only their refinance portfolio is exempt. For other lending activities, they must follow the exposure norms. RBI also advises them to set board-approved internal limits for refinance portfolios.
What is the effective date of this master circular?
The circular is dated July 2, 2007, and consolidates instructions up to June 30, 2007. It supersedes the previous master circular of July 2006.
Can exposures guaranteed by the Government of India be excluded from borrower limits?
Yes, while computing exposure to a borrower or group, exposures where both principal and interest are fully guaranteed by the Government of India may be excluded.