**Summary:**
This Reserve Bank of India (RBI) circular, reference number RBI201819156 DBR.No.BP.BC.3121.01.003201819, issued on April 1, 2019, addresses the Large Exposures Framework (LEF) for all Scheduled Commercial Banks (excluding Regional Rural Banks). It modifies the guidelines outlined in circular DBR.No.BP.BC.4321.01.003201617 dated December 1, 2016.
Key changes and clarifications include:
1. **Derivatives Exposures:** Non-centrally cleared derivatives exposures are excluded from exposure limits until April 1, 2020. Banks are required to compute and report these exposures to the Department of Banking Regulation on a quarterly basis.
2. **Foreign GSIB Branches:** An Indian branch of a foreign Global Systemically Important Bank (GSIB) is treated as any other Indian bank for LEF purposes, allowing it to take exposure up to 25% of its Tier I capital on another non-GSIB in India.
3. **Interbank Exposure (Foreign GSIB Branches):** The interbank exposure limit of an Indian branch of a foreign GSIB with its Head Office is capped at 20% of its Tier I capital in India.
4. **Eligible Capital Base:** The eligible capital base for LEF calculation is the effective Tier 1 capital, adhering to the criteria in the Master Circular on Basel III Capital Regulation dated July 1, 2015 (as amended). Capital infused under Tier I after the published balance sheet date can be considered, contingent upon an external auditor's certificate submitted to the Reserve Bank of India, Department of Banking Supervision.
5. **Indian Banks' Profits:** For Indian Banks, profits accrued during the year, subject to provisions contained in para 4.2.3.1 vii of Master Circular on Basel III Capital Regulation dated July 1, 2015 (as amended), can be reckoned as Tier I capital for LEF purposes.
6. **Breach of Interbank Limits:** No additional time will be granted to banks exceeding specified interbank limits (with other banks or their Head Offices) to rectify their exposures.
The circular is addressed to Madam/Dear Sir and signed by Saurav Sinha, Chief General Manager-in-Charge.
Key Entities Referenced
Reserve Bank of India: The central bank of India, referred to in the context of receiving reports and certificates.
All Scheduled Commercial Banks: The group of banks to which the circular is addressed, excluding Regional Rural Banks.
Large Exposures Framework (LEF): The framework governing exposure limits for banks, the subject of the circular.
Department of Banking Regulation: A department of the Reserve Bank of India to which banks must report derivatives exposures.
Global Systemically Important Banks (GSIB): Foreign GSIB branches in India are treated as any other Indian bank for exposure limits.
Tier I capital: The capital base used for reckoning exposure limits under the Large Exposures Framework.
Master Circular on Basel III Capital Regulation: A circular dated July 1, 2015, which defines the criteria for Tier 1 capital.
Department of Banking Supervision: A department of the Reserve Bank of India to which external auditors certificate needs to be submitted.
RBI/2018-19/156
DBR.No.BP.BC.31/21.01.003/2018-19 April 1, 2019
All Scheduled Commercial Banks
(Excluding Regional Rural Banks)
Madam/Dear Sir,
Large Exposures Framework (LEF)
Please refer to the circular DBR.No.BP.BC.43/21.01.003/2016-17 dated December 01,
2016 on the subject. After due consideration of the representations received from
stakeholders, it has been decided as under:
i) Non-centrally cleared derivatives exposures will be outside the purview of
exposure limits till April 01, 2020. However, banks must compute these
exposures separately and report to the Department of Banking Regulation on
quarterly basis.
ii) For the purpose of reckoning exposure limits under LEF, an Indian branch of
a foreign G-SIB will be considered as any other Indian bank and can
accordingly take exposure upto 25% of its Tier I capital on another non-GSIB
in India.
iii) The interbank exposure limit of an Indian branch of a foreign G-SIB with its
Head Office will be 20% of its Tier I capital in India.
iv) The eligible capital base for the purpose of LEF will be the effective amount of
Tier 1 capital fulfilling the criteria defined in the Master Circular on Basel III –
Capital Regulation dated July 1, 2015 (as amended from time to time) as per
the last audited balance sheet. However, the infusion of capital under Tier I
after the published balance sheet date may also be taken into account for the
purpose of Large Exposures Framework. Banks shall obtain an external
auditor’s certificate on completion of the augmentation of capital and submit
the same to the Reserve Bank of India (Department of Banking Supervision)
before reckoning the additions to capital funds.v) For Indian Banks, profits accrued during the year, subject to provisions
contained in para 4.2.3.1 (vii) of Master Circular on Basel III – Capital
Regulation dated July 1, 2015 (as amended from time to time), will also be
reckoned as Tier I capital for the purpose of Large Exposures Framework.
vi) No additional time shall be given to banks that are in breach of specified
interbank limits with other banks or with their Head Offices, to bring their
exposures within limit.
Yours faithfully,
(Saurav Sinha)
Chief General Manager-in-Charge