What changed
This master circular updates and consolidates all prior instructions on exposure norms for financial institutions up to June 30, 2009. It replaces the previous master circular dated July 1, 2008, and includes instructions from Annex 3. The circular reaffirms existing prudential limits and reporting requirements without introducing new substantive changes.
What it means for you
Banks and FIs must continue adhering to the established exposure ceilings: 15% of capital funds for single borrowers and 40% for group borrowers, with higher limits for infrastructure projects. Refinancing institutions like NABARD, NHB, and SIDBI are exempt for their refinance portfolio but advised to set internal limits. The circular emphasizes risk management and concentration avoidance, not replacing credit appraisal.
What you must do
- Review and ensure compliance with single borrower (15% of capital funds) and group borrower (40%) exposure limits.
- For infrastructure projects, apply the higher exposure ceiling of 20% for single and 50% for group borrowers.
- Refinancing institutions should set board-approved internal exposure limits for their refinance portfolio.
- Report any excess exposures to the Board and take corrective action within prescribed timelines.
- Maintain updated records and disclosures as per the consolidated circular's annexures.
Who it affects
Exim Bank, NABARD, NHB, SIDBI, All-India term-lending institutions, Banks with exposure to these FIs
What are the key exposure limits for single and group borrowers?
For single borrowers, the limit is 15% of capital funds; for group borrowers, it is 40%. For infrastructure projects, these limits are relaxed to 20% and 50%, respectively.
Are refinancing institutions like NABARD and NHB subject to these norms?
Their refinance portfolio is exempt from these exposure norms, but they are advised to set their own board-approved prudential limits for such operations.
What should be done if existing exposures exceed the prescribed ceilings?
Institutions must take steps to rectify the excess within one year from the date of the initial circular (June 28, 1997) and report such cases to their Board of Directors.