**Executive Summary**
This Amendment Circular, issued by the Reserve Bank of India (RBI) on DD-MM-YY, amends the Large Exposures Framework (LEF circular) dated June 3, 2019, and the Large Exposures Framework – Credit Risk Mitigation (LEF-CRM circular) dated September 9, 2021. The circular clarifies the treatment of intra-group exposures of foreign bank branches in India and provides modifications related to offsetting gross exposure and credit risk mitigation. These amendments come into force from April 1, 2026, with banks having the option to implement them earlier.
**Key Points / Main Content**
* **Amendments to the LEF Circular:**
* **Intra-group Exposures:** Clarifies that exposures of a foreign bank branch in India to its Head Office (HO) or its branches/subsidiaries are not excluded from LEF, and counterparty limits applicable for HO exposures apply in aggregate.
* **Exposure Calculation:** Specifies that exposures of an Indian branch of a foreign bank to its HO or any of its branches, cleared through a central counterparty or otherwise, must be calculated on a gross basis.
* **Amendments to the LEF-CRM Circular:**
* **Offsetting Gross Exposure:** Modifies paragraph 2 to clarify the offsetting of gross exposure, including those not arising from non-centrally cleared derivative transactions, of foreign bank branches in India to the HO or overseas branches of the HO, for the calculation of LEF limit, subject to conditions.
* **Credit Risk Mitigation (CRM) Disclosure:** Modifies paragraph 3 to require disclosure of the amount held under section 11(2)(b)(i) of the Banking Regulation Act and earmarked as CRM for offsetting non-centrally cleared derivative exposures to Head Office (including overseas branches) as a note in Schedule 1: Capital to the Balance Sheet. Specifies that these amounts are not reckoned for regulatory capital and any other statutory requirements.
* **Effective Date:** The amendments come into force from April 1, 2026. Banks may implement the changes earlier.
**Impact Analysis**
**Foreign Bank Branches in India**
* **Impact:** Affected by changes in the treatment and calculation of intra-group exposures and offsetting gross exposures.
* **Action Required:** Need to adjust their exposure calculations and reporting to comply with the new guidelines. May choose to implement the changes before the April 1, 2026 deadline.
Key Entities Referenced
Large Exposures Framework: Framework that sets limits on exposures banks can have to single counterparties or groups of connected counterparties.
Banking Regulation Act, 1949: An act to consolidate and amend the law relating to banking companies.
Large Exposures Framework – Credit Risk Mitigation (CRM) for offsetting – non-centrally cleared derivative transactions of foreign bank branches in India with their Head Office: A circular providing guidance on offsetting credit risk for certain derivative transactions under the LEF.
Amendment Circular: The circular being issued which contains the specified amendments to existing circulars.
Reserve Bank of India: The central bank of India, responsible for regulating the banking sector.
भारतीय ररज़र्व बैंक
RESERVE BANK OF INDIA
_________________________ ______________________
www.rbi.org.in
Draft for Comments
RBI/2025-26/__
DOR.CRE.REC.__/21.01.003/2025-26 DD-MM-YY
Large Exposures Framework (Amendment Circular), 2025
Please refer to Large Exposures Framework dated June 3, 2019 (hereinafter referred
to as the “LEF circular”) and Large Exposures Framework – Credit Risk Mitigation
(CRM) for offsetting – non-centrally cleared derivative transactions of foreign bank
branches in India with their Head Office dated September 9, 2021 (hereinafter referred
to as the “LEF-CRM circular”).
2. On a review, in exercise of the powers conferred by the sections 21 and 35A of the
Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank in this
regard, the Reserve Bank being satisfied that it is necessary and expedient in the
public interest to do so, hereby issues the Amendment Circular hereinafter specified.
3. The Amendment Circular modifies the above-mentioned circulars as under:
A. Amendments to the LEF Circular
(i) In paragraph 3.1 of the Annex to the LEF circular, an explanation shall be
inserted below sub-clause (f) as highlighted:
“3.1 …The exposures that are exempted from the LEF are listed below:
f. Intra-group exposures
Explanation - Exposure of a foreign bank operating in India as a branch
to its Head Office (HO), or to a branch/subsidiary of its HO in any
jurisdiction, shall not fall under this exclusion, and the counterparty limits
applicable for its HO exposures in terms of paragraph 10.12 below, shall
apply to such exposures in aggregate.”
विवियमि विभाग, केंद्रीय कायाालय, केंद्रीय कायाालय भिि, 12िी/ीं 13िी ींमींव़िल, शहीद भगत व ींह मागा, फोर्ा, म ींबई - 400001
र्ेलीफोि/ Tel No: 22661602, 22601000 फैक्स/ Fax No: 022-2270 5691
Department of Regulation, Central Office, Central Office Building, 12th/ 13th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001
हहदिं ी आसान ह,ैं इसका प्रयोग बड़ाइए(ii) At the end of paragraph 10.12, the following shall be inserted:
“Explanation - In respect of transactions between an Indian branch of a
foreign bank and its HO or any of its branches that may be cleared
through a central counterparty or otherwise, such exposures of the
Indian branch must always be calculated on a gross basis.”
B. Amendments to the LEF-CRM Circular
(i) Paragraph 2 shall be partially modified as under:
“It is advised that ….. for offsetting the gross any exposure (including
those not arising from non-centrally cleared derivative transactions) of
the foreign bank branches in India to the HO or (including overseas
branches of the HO, for the calculation of LEF limit, subject to the
following conditions:”
(ii) Paragraph 3 shall be partially modified as under:
“3. The amount held under section 11(2)(b)(i) of the BR Act and
earmarked as CRM shall be disclosed by way of a note in Schedule 1:
Capital to the Balance Sheet as given below:
“An amount of …. designated has been earmarked as credit risk
mitigation (CRM) for offsetting of non-centrally cleared derivative
exposures to Head Office (including overseas branches of Head Office)
and is not reckoned for regulatory capital and any other statutory
requirements, if any.”
4. The above amendments shall come into force from April 1, 2026. Banks may
however decide to implement the amendments in entirety from an earlier date.
(Vaibhav Chaturvedi)
Chief General Manager
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