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Lending Policy and Exposure


Loans & Advances – Statutory &
Other Restrictions
• Advances against bank's own shares
• Advances to bank's Directors
• Restrictions on loans to Companies for Buy-back
of Shares
• Granting loans and advances to relatives of
• Lending to directors and their relatives on
reciprocal basis
• Restrictions on Grant of Loans & Advances and
awarding contract to Officers and Relatives of
Senior Officers of Banks

Policy framework on loans and advances • Grant of Financial Assistance to Industries Producing / Consuming Ozone Depleting Substances (ODS) • Restrictions on Advances against Sensitive Commodities under Selective Credit Control (SCC) • Restriction on payment of commission to staff members • Restrictions on offering incentives on any banking products .

Policy framework on loans and advances • • • • To individuals (in physical form/Demat) Stock Brokers and Commodity Brokers Financing of IPO Finance to assist employees to buy shares of their own companies • Margin requirements • Advances to other borrowers against shares/debentures/ bonds (newly established units) .

Policy framework on loans and advances • Loans and advances to Real Estate Sector • Loans and advances to Micro and Small Enterprises (MSEs) • Loan system for delivery of bank credit • Lending under Consortium/ Multiple Banking Arrangement • Working Capital Finance to IT and Software Industry • Transfer of borrowal accounts from one bank to another (Take over) • Staff accountability in quick mortality take over cases • Guidelines on Fair Practices Code for Lenders .

shall be reckoned for arriving at the exposure limit. whichever are higher. The sanctioned limits or outstandings. where there is no scope for re-drawal of any portion of the sanctioned limit.EXPOSURE NORMS Exposure  Exposure shall include credit exposure (funded and non-funded credit limits) and investment exposure (including underwriting and similar commitments).  1 . in the case of fully drawn term loans. banks may reckon the outstanding as the exposure. However.

  b) facilities extended by way of equipment leasing. hire purchase finance and factoring services. 1 .EXPOSURE NORMS   Credit Exposure  Credit exposure comprises the following elements: a) all types of funded and non-funded credit limits.

• Banks are prohibited from taking exposure in excess of the ceiling in anticipation of infusion2 of . after the published balance sheet date will also be taken into account • Accretions to capital funds by way of quarterly profits would not be eligible for determining the exposure ceiling. • Infusion of capital under Tier I and Tier II.EXPOSURE NORMS • Capital Funds • Tier I and Tier II capital as per capital adequacy standards • As per the published accounts as on March 31 of the previous year.

– In case of public sector undertakings.EXPOSURE NORMS • Group  – The concept of 'Group' and the task of identification of the borrowers belonging to a groups is left to the banks/FI – The guiding principle being commonality of management and effective control. – If banks and FIs have doubts about the bona 3 RBI fides of the split. a reference may be made to . if the split is formalised the splinter groube regarded as separate groups. only single borrower exposure limit would be applicable.  – In case of a split in the group.

  Guarantee by the Government of India Not applicable where principal and interest 5are .EXPOSURE NORMS • Exemptions Rehabilitation of Sick/Weak Industrial Units The ceilings on single/group exposure limits are not applicable to existing/additional credit facilities (including funding of interest and irregularities) granted to weak/sick industrial units under rehabilitation packages. will be exempt from the ceiling. Food credit Borrowers. to whom limits are allocated directly by the Reserve Bank for food credit.

The individual banks are free to determine the size of the exposure to NABARD 6 .EXPOSURE NORMS Loans against Own Term Deposits • Should not be reckoned for computing the exposure to the extent that the bank has a specific lien on such deposits. Exposure on NABARD Will not be applicable to exposure assumed by banks on NABARD.

EXPOSURE NORMS Limit Single and Group Borrower Limits Regulatory limit i) a)15 percent of capital funds in case of a single borrower and 40 percent of capital funds* in case of a group borrower b) – Additional 5%/10% incases of infrastructure projects ii) Single Borrower – Oil companies-25% iii) Single NBFC / NBFC-AFC-10%/15% iv) Single NBFC / NBFC-AFC.infrastructure -15%/20% *Capital funds for the purpose comprise of Tier I & Tier II will Substantial Exposure Financing Indian Companies for acquisition of Equity in Foreign Companies: Limit for Exposure to Indian Joint Ventures / Whollyowned Subsidiaries Abroad and Overseas Step-down subsidiaries of Indian corporates 20 percent of banks’ unimpaired capital funds (Tier I and Tier II capital 7 .

as on March 31 of the previous year. Within this overall ceiling. direct investment in shares. units of equity-oriented mutual funds and all exposures to Venture Capital Funds (VCFs) (both registered and unregistered) should not exceed 20% of the Bank's net worth.EXPOSURE NORMS Sensitive Sector Exposure Limits Capital Market Exposure (CME): The aggregate exposure to the capital market in all forms (both fund based and non-fund based) should not exceed 40% of the Bank's net worth . convertible bonds / debentures. Exposure to Stock brokers and Market makers Exposure to any single stock broking entity including its associates / inter-connected companies and single broker 8 .

EXPOSURE NORMS Commercial Real estate(CRE) Residential Real estate(RRE) Industry wise exposure: Term Loan Exposure Limits: Ratingwise advances Geographical Limits Net Unsecured Global Credit Exposure 9 .

Hire Purchase and Factoring Services •   Exposure to Indian Joint Ventures/Wholly-owned Subsidiaries Abroad and Overseas Step-down Subsidiaries of Indian Corporates 10 .EXPOSURE NORMS • Credit Exposure to Industry and certain Sectors • Internal Exposure Limits • Fixing of Sectoral Limits • Unhedged Foreign Currency Exposure of Corporates • Exposure to Real Estate • Exposure to Leasing.

convertible bonds. The aggregate exposure (both fund and non-fund based) of banks to capital markets in all forms would include the following: • direct investment in equity shares.EXPOSURE NORMS • Components of Capital Market Exposure (CME) • Banks' capital market exposures would include both their direct exposures and indirect exposures. 11 . where the primary security other than shares/convertible bonds/convertible debentures/units of equity oriented mutual funds does not fully cover the advances. convertible debentures.  • advances against shares/bonds/debentures or other securities or on clean basis to individuals for investment in shares (including IPOs/ESOPs). convertible debentures and units of equity-oriented mutual funds the corpus of which is not exclusively invested in corporate debt.e.  • advances for any other purposes to the extent secured by the collateral security of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds i. • advances for any other purposes where shares or convertible bonds or convertible debentures or units of equity oriented mutual funds are taken as primary security. and units of equity-oriented mutual funds. convertible bonds.

• all exposures to Venture Capital Funds (both registered and unregistered). • loans sanctioned to corporates against the security of shares / bonds/ debentures or other securities or on clean basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources. • Irrevocable Payment Commitments issued by custodian banks in favour of stock exchanges. 12 .EXPOSURE NORMS • secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers. • underwriting commitments taken up by the banks in respect of primary issue of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds. • bridge loans to companies against expected equity flows/issues.  • financing to stockbrokers for margin trading.

Central Depository Services (India) Ltd. Clearing Corporation of India Ltd. (CDSL). NSE. National Multi-Commodity Exchange of India Ltd.. (NSDL). RRBs and investments in shares and debentures. joint ventures. National Securities Clearing Corporation Ltd. NCDEX. (NSCCL). National Collateral Management Services 13 . (CCIL). (NMCEIL).EXPOSURE NORMS Items excluded from Capital Market Exposure • The following items would be excluded from the aggregate exposure ceiling of 40 per cent of net worth and direct investment exposure ceiling of 20 per cent of net worth (wherever applicable): • Banks’ investments in own subsidiaries. convertible bonds issued by institutions forming crucial financial infrastructure such as National Securities Depository Ltd.

  • Shares acquired by banks as a result of conversion of debt/overdue interest into equity under Corporate Debt Restructuring (CDR) mechanism.  • Non-convertible debentures and non-convertible bonds.  • Term loans sanctioned to Indian promoters for acquisition of equity in overseas joint ventures / 14 .EXPOSURE NORMS • Tier I and Tier II debt instruments issued by other banks. • Preference Shares.  • Units of Mutual Funds under schemes where the corpus is invested exclusively in debt instruments. • Investment in Certificate of Deposits (CDs) of other banks.

Thank You .