What changed
This master circular consolidates all previous instructions on exposure norms for financial institutions up to June 30, 2011, replacing the July 1, 2010 circular. It updates definitions, exposure ceilings, and reporting requirements for Exim Bank, NABARD, NHB, and SIDBI. The refinancing portfolio of NABARD, NHB, and SIDBI remains exempt from these norms, but they are advised to set their own board-approved limits.
What it means for you
Banks and FIs must align their credit exposure monitoring with the consolidated norms, especially for single and group borrower limits. The circular reinforces prudential risk management to avoid concentration of credit, with clear ceilings and board oversight. Refinancing institutions need to internally set exposure limits for their refinance portfolio, even though exempted.
What you must do
- Review and update internal exposure policies to comply with the consolidated ceilings for single and group borrowers.
- Ensure board-approved limits are in place for refinancing portfolios at NABARD, NHB, and SIDBI.
- Monitor and report any excess exposures to the board and rectify within stipulated timelines.
- Align definitions of capital funds, infrastructure lending, and group borrowers as per the circular.
Who it affects
Exim Bank, NABARD, NHB, SIDBI, All-India term-lending institutions, Banks with exposure to these FIs
Are refinancing institutions like NABARD and NHB fully exempt from these exposure norms?
Their refinance portfolio is exempt, but they are advised to set their own board-approved credit exposure limits for prudential purposes.
What happens if an FI's existing exposure exceeds the new ceilings?
The FI must rectify the excess and comply within one year from the initial circular date (June 28, 1997), and report such cases to the board.
Does this circular apply to commercial banks?
No, it applies specifically to all-India term-lending and refinancing institutions (Exim Bank, NABARD, NHB, SIDBI). Banks have separate exposure norms.