Definitions:
(i)
Aggregate
Sanctioned Credit Limit (ASCL): The aggregate of the fund based credit limits or
outstanding, whichever is higher. It would also include unlisted privately
placed debt with the banking system.
(ii)
‘Specified
borrower’: A borrower having an ASCL of more than
a)
Rs.25,000
crore at any time during FY 2017-18;
b)
Rs.15,000
crore at any time during FY 2018-19;
c)
Rs.10,000
crore at any time from April 1, 2019 onwards;
(iii) ‘Reference date’:
The date on which a borrower becomes a ‘specified borrower’.
(iv) Normally
permitted lending limit (NPLL): 50% of the incremental funds raised by
the specified borrower over and above its ASCL as on the reference date, in the
financial years (FYs) succeeding the FY of the reference date falls. Any funds
raised by way of equity shall be deemed to be part of incremental funds;
Where
a specified borrower has
· already raised
funds by way of market instruments and
· the amount, as
on the reference date is 15% or more of ASCL
the
NPLL will mean 60% of the incremental funds raised by the specified
borrower over and above its ASCL as on the reference date, in the financial
years (FYs) succeeding the FY in which the reference date falls.
(v)
Banking
system: All banks in India including RRBs and co-operative banks and branches
of Indian banks abroad.
(vi) Market
instruments, shall include bonds, debentures, redeemable preference shares and
any other non-credit liability, other than equity.
Scope:
These guidelines
will be applicable on all single counterparties of Scheduled Commercial Banks
(SCBs), except other SCBs, NBFCs registered with RBI, AIFIs and HFCs registered
with NHB. It will be effective from the year 2017-18 onwards.
Prudential
Measures:
From 2017-18
onwards, incremental exposure to a specified borrower beyond NPLL shall be
deemed to carry higher risk, hence, higher provisioning and higher risk weights
will apply as under:
(i)
3
percentage points over and above the applicable provision, which shall be
distributed in proportion to each bank’s funded exposure to the specified
borrower.
(ii)
Additional
Risk weight of 75 percentage points over and above the applicable risk weight.
The additional risk weighted exposure, shall be distributed in proportion to
each bank’s funded exposure to the specified borrower.
Explanation: For the purpose of determining exposure
beyond NPLL, subscription by the banking system to market instruments
shall be included, except any subscription made by the banking system to the
market instruments issued by a specified borrower in 2017-18 and held within
the permissible prudential limits by a bank, as derived from the para below.
Banks
may, subscribe to bonds issued by the specified borrowers (over and above NPLL)
in the first year, subject to investment guidelines and these being divested in
the subsequent three years:
(i)
Not
less than 30% by March 31, 2019
(ii) Not less than 60%
by March 31, 2020
(iii)
Not
less than 100% by March 31, 2021.
All holdings by a bank of market instruments issued
by a 'specified borrower' after the ‘reference date’ shall be held in the
AFS/HFT category and marked to market. However, banks may, value their holdings
of market instruments issued by the specified borrowers in 2017-18 at book
value.
Based on RBI notification dated 25/08/2016. For any further
clarification, please refer www.rbi.org.in
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