RBI's own words: “The present guidelines shall supercede all existing instructions issued to standalone PDs in this regard.” — RBI/2013-14/541
Source: Reserve Bank of India · RBI/2012-13/189 · issued 03 Sep 2012 · ~2 min read
Quick answerRBI exempts bonds fully guaranteed by Government of India from single/group borrower exposure limits for standalone Primary Dealers. PDs must still include all other non-government securities and instruments when calculating their 25% single and 40% group borrower limits based on latest audited net owned funds.
The rule, in the simplest words
Bonds fully backed by the Government of India (where both the loan amount and interest are guaranteed) are exempt from the 25% single borrower and 40% group borrower limits for Primary Dealers (companies that buy and sell government bonds).
When calculating the 25% single borrower and 40% group borrower limits, Primary Dealers must include all other non-government investments like mutual funds (pools of money from many investors), commercial papers (short-term loans to companies), certificate of deposits (bank savings certificates), and IRS (interest rate swap agreements).
Primary Dealers must use their latest audited net owned funds (the company's own money after subtracting debts) to figure out these limits.
How it plays out — a real example
A treasury officer in Indore, Priya, works for a standalone Primary Dealer. She can now buy more Government of India-guaranteed bonds without worrying about hitting the 25% single borrower limit, freeing up room for her firm to hold more government securities. However, when she checks her firm's exposure to a corporate client, she must include the value of any mutual funds, commercial papers, and IRS positions they hold, using the latest audited net owned funds to ensure she stays within the 40% group borrower limit.
What changed
RBI reviewed earlier exposure norms and decided that the 25% single borrower and 40% group borrower limits on credit exposure will not apply to bonds where principal and interest are fully guaranteed by the Government of India. PDs are now required to include credit risk from all other non-government securities—such as mutual funds, commercial papers, certificate of deposits, and positions in IRS—when computing these exposure ceilings.
What it means for you
Standalone Primary Dealers can now hold larger positions in GoI-guaranteed bonds without breaching exposure limits, freeing up headroom for government securities. However, the RBI has tightened the definition of credit exposure by mandating inclusion of a wider range of non-government instruments, which may compress limits for other asset classes. PDs must use the latest audited net owned funds for calculations, ensuring accuracy in compliance.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Exclude GoI-guaranteed bonds (principal and interest fully guaranteed) from single/group borrower exposure limit calculations.
Include all non-government securities—mutual funds, commercial papers, certificate of deposits, IRS positions—when computing credit exposure for the 25% single and 40% group borrower limits.
Use the latest audited net owned funds figure for all exposure limit calculations.
Review and update internal credit exposure monitoring systems to reflect the revised scope of instruments.
Who it affects
Standalone Primary Dealers, Risk management teams at PDs, Compliance departments of PDs
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Are all government-guaranteed bonds exempt from exposure limits?
Only bonds where both principal and interest are fully guaranteed by the Government of India are exempt from the single/group borrower exposure limits. Partial guarantees or guarantees from state governments are not covered by this exemption.
What instruments must PDs include in credit exposure calculations?
PDs must include credit risk exposures from all non-government securities, including investments in mutual funds, commercial papers, certificate of deposits, and positions in interest rate swaps (IRS), among others.
Which net owned funds figure should be used for these limits?
The latest audited net owned funds (NOF) must be used when calculating the 25% single borrower and 40% group borrower exposure ceilings.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
RBI’s words: “The present guidelines shall supercede all existing instructions issued to standalone PDs in this regard.”
📜 Read the original circular — full text as issued by RBI
RBI/2012-13/189
IDMD. PCD.No.718/14.03.05/2012-13
September 3, 2012
All Standalone Primary Dealers
Dear Sir/Madam,
Applicability of credit exposure norms for bonds guaranteed by the Government of India
Please refer to circulars IDMD.PDRD.No.19 /03.64.00 / 2010-11 dated July 27, 2010 and IDMD.PCD.No.1652/14.03.05/2010-11 dated November 11, 2010 wherein standalone Primary Dealers (PDs) were advised to adhere to the credit exposure limits of 25 per cent of their net owned funds (NOF) to single borrower and 40 per cent of their NOF to group borrowers.
2. The matter has since been reviewed and it has been decided that the ceilings on single /group exposure limit would not be applicable where principal and interest are fully guaranteed by the Government of India.
3. Further, it is clarified that PDs should include credit risk exposures to all other categories of non-Government securities investment including investments in mutual funds, commercial papers, certificate of deposits, positions in IRS etc. to compute extent of credit exposure to adhere to the prescribed single borrower limit of 25 per cent of NOF and group borrower limit of 40 per cent of NOF.
4. Latest audited NOF should be taken into account while calculating the above mentioned ceilings.
5. The above guidelines are effective from the date of the circular.
Yours faithfully
(K.K. Vohra)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/189 · issued 03 Sep 2012. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7541&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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