RBI revises risk weights for NBFCs' sovereign debt exposures

The Reserve Bank on Thursday asked non- systematically important deposit taking and non-deposit-taking NBFCs, including infra and micro-lenders, to set aside 15% of their aggregate capital towards their holdings in Central and State Governments’ debts as prudential measures.

In a circular, the central bank said the new norms will be applicable to all deposit accepting non-systematically important NBFCs, systemically important non-deposit taking NBFCs, all NBFC-MFIs and all NBFC-infra finance companies.

They will “maintain a minimum capital ratio consisting of tier I and II capital not less than 15% of their aggregate risk-weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items,” the RBI said.

Under the new norms, these companies will attract zero risks to their exposures to Central Government debt, both fund based and non-fund based. The same will be the case for the Central Government-guaranteed claims, the regulator said.

For exposures to State Governments debt, there will also be zero risk weight if their exposures are to direct loan /credit/overdraft exposure and investment from state government securities. But State Government-guaranteed claims, which have not remained in default, will attract 20% risk weight and if the loans guaranteed by the states have remained in default for over 90 days, the risk weight will be 100%.

Today’s notification will supersede the existing regulations issued in February 2007 and February 2015, it said. The central bank said the revision is based on the representations from the industry.


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