NEWS & ADVICE : CREDIT CARDS
RBI unlikely to increase exposure limit
By Ankit Sharma
Dec 1, 2009
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The Reserve Bank of India (RBI) is reluctant to accept a request from banks regarding greater exposure in a single corporate group.

 

Banks led by SBI, country's largest lender, had approached RBI to relax group exposure norms for infrastructure sectors, at least for corporate houses that enjoyed a high level of credibility.

Representatives of some large banks raised this issue during a meeting with the regulator but the bank was mute on whether to accept the request or not. RBI, however, urged the banks to increase lending to infrastructure sectors such as roads, ports, power and telecommunications.

According to a source, "RBI wants banks to lend more in the infrastructure sector. However, most of the banks are finding their group exposure for big corporate houses involved in core sector projects are almost touching the limit. So, there is a request to give some leeway for reputed groups on a case-to-case basis."

RBI asked banks to consider if such a huge exposure to one group of borrowers was wise. Sources said that the apex bank was of the opinion that the existing limit was in any case higher than the limit prescribed globally.

When the banks had previously demanded this, the finance ministry had also supported them. They had asked for an overall relaxation in the group exposure limit capped at 40 percent of the bank's infrastructure funds. The current infrastructure exposure limit is 50 percent.

Only n exigencies, banks are allowed to exceed both single company limit and group exposure limits by an additional five percent.

 


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