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.
What you must do
- 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
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.