What changed
Earlier, only scheduled commercial banks could issue IBPCs under the scheme introduced in 1988. Now, RRBs are also allowed to issue IBPCs with a tenor of 180 days on a risk-sharing basis, specifically against their priority sector advances that exceed 60% of their total outstanding advances. All other features of the IBPC scheme remain unchanged.
What it means for you
This gives RRBs a new liquidity management tool by allowing them to transfer part of the credit risk on excess priority sector advances to scheduled commercial banks. For banks, it opens an avenue to acquire priority sector exposure through IBPCs, potentially helping them meet priority sector lending targets. The 180-day tenor and risk-sharing nature mean both parties share the credit risk on the underlying advances.
What you must do
- Review your RRB's current priority sector advances ratio to identify if you have advances exceeding 60% of outstanding advances that could be securitized via IBPCs.
- Update internal policies and documentation to enable issuance of 180-day risk-sharing IBPCs to scheduled commercial banks.
- Train treasury and credit teams on the IBPC scheme mechanics, including risk-sharing terms and reporting requirements.
- Coordinate with scheduled commercial banks to explore potential IBPC placements for excess priority sector advances.
Who it affects
Regional Rural Banks (RRBs), Scheduled Commercial Banks (as buyers of IBPCs), Treasury departments of RRBs, Priority sector lending teams
What is the minimum tenor for IBPCs issued by RRBs under this circular?
The circular specifies a tenor of 180 days for IBPCs issued by RRBs on a risk-sharing basis.
Can RRBs issue IBPCs against all their advances, or only specific ones?
IBPCs can only be issued against priority sector advances that are in excess of 60% of the RRB's total outstanding advances.
Does this circular change any other features of the IBPC scheme?
No, all other features of the IBPC scheme remain unchanged as per the original circular dated December 31, 1988.