What changed
RBI replaced the July 2007 master circular on exposure norms with an updated version incorporating all instructions issued up to June 30, 2008. The circular consolidates guidelines on credit exposure limits for individual/group borrowers, sector-specific exposures, and capital market exposure, including definitions, exemptions, and risk management requirements.
What it means for you
Banks must align their lending and investment practices with the updated exposure limits and reporting standards. The circular reinforces prudential norms to manage concentration risk and capital market volatility, impacting loan sanctioning, portfolio diversification, and compliance monitoring.
What you must do
- Review and update internal credit policies to reflect the revised exposure ceilings for individual and group borrowers.
- Ensure capital market exposure calculations include all components listed in the circular and adhere to prescribed limits.
- Strengthen risk management and internal control systems for monitoring sectoral and capital market exposures.
- Train credit and compliance teams on the updated definitions, exemptions, and reporting requirements.
- Verify that all exposures to leasing, hire purchase, factoring, and overseas subsidiaries comply with the circular.
Who it affects
All scheduled commercial banks (excluding RRBs), Credit risk and compliance departments, Loan sanctioning and portfolio management teams, Investment and treasury divisions handling capital market exposure
Does this circular apply to Regional Rural Banks?
No, the circular explicitly excludes Regional Rural Banks (RRBs) from its application.
What is the effective date of this master circular?
The circular is dated July 1, 2008, and updates instructions issued up to June 30, 2008.
Where can I find the full list of consolidated circulars?
Annex 4 of the master circular lists all previous circulars that have been consolidated into this document.