What changed
The Reserve Bank of India has amended the prudential norms on capital adequacy for commercial banks. A new paragraph has been inserted, which states that exposures guaranteed under the Emergency Credit Line Guarantee Scheme 5.0 will attract a zero percent risk weight to the extent of 75% of the guaranteed portion. The remaining exposure will attract a risk weight as per existing guidelines.
What it means for you
This amendment is expected to provide relief to banks by reducing their capital requirements for ECLGS 5.0 exposures. It may also encourage banks to lend more to eligible borrowers under the scheme. The reduced risk weight will help banks to manage their capital more efficiently and support economic growth.
What you must do
- Review existing ECLGS 5.0 exposures and calculate the reduced risk weight
- Update capital adequacy calculations to reflect the new risk weight
- Consider increasing lending to eligible borrowers under the ECLGS 5.0 scheme
Who it affects
Commercial banks, Eligible borrowers under ECLGS 5.0
What is the risk weight for ECLGS 5.0 guaranteed exposures?
Zero percent for 75% of the guaranteed portion
When does the amendment come into effect?
Immediately
How will the amendment impact banks?
It will reduce their capital requirements for ECLGS 5.0 exposures