What changed
This master circular consolidates all prior instructions on exposure norms for all-India term-lending and refinancing institutions up to June 30, 2012. It updates the previous master circular of July 1, 2011, and includes instructions from Annex 4. The refinance portfolios of NABARD, NHB, and SIDBI remain exempt from these exposure ceilings.
What it means for you
Banks and FIs must ensure their credit exposures to single and group borrowers stay within prescribed limits to avoid concentration risk. Refinancing institutions need board-approved internal limits for their refinance portfolios. Non-compliance with exposure ceilings requires board notification and corrective action within a year.
What you must do
- Review current exposure levels against the 15% single and 40% group borrower limits on capital funds.
- Ensure refinance portfolios have board-approved internal exposure limits if not already in place.
- Report any excess exposures to the board and take corrective steps within the prescribed timeline.
- Update internal credit policies to align with the consolidated master circular instructions.
Who it affects
Exim Bank, NABARD, NHB, SIDBI, All-India term-lending institutions
What are the exposure ceilings for single and group borrowers?
For single borrowers, exposure is capped at 15% of capital funds; for group borrowers, at 40%. These limits apply to lending and investment exposures.
Are refinance portfolios subject to these exposure norms?
No, refinance portfolios of NABARD, NHB, and SIDBI are exempt. However, these institutions are advised to set their own board-approved limits for such portfolios.
What happens if an FI exceeds the prescribed exposure limits?
Excess exposures must be brought to the board's notice and rectified within one year from the date of the first circular (June 28, 1997) or as per subsequent instructions.