What changed
RBI issued a new Master Circular replacing the July 2010 version, incorporating all instructions issued up to June 30, 2011. The circular consolidates and updates previous guidelines on credit exposure limits, sectoral caps, and capital market exposure for scheduled commercial banks.
What it means for you
Banks now have a single reference document for exposure norms, reducing ambiguity and ensuring uniformity. Compliance with these updated limits is mandatory; deviations could attract regulatory scrutiny. The circular reinforces RBI's focus on risk management and concentration risk mitigation.
What you must do
- Review and update internal exposure policies to align with the consolidated Master Circular.
- Ensure credit exposure to individual/group borrowers and sectors stays within prescribed ceilings.
- Monitor capital market exposure components and adhere to the defined limits.
- Train credit and risk teams on the updated definitions and exemptions.
- Maintain documentation for any exemptions claimed under the circular.
Who it affects
All scheduled commercial banks (excluding RRBs), Credit and risk management departments, Board-level committees overseeing exposure limits
Does this Master Circular replace all previous exposure norm circulars?
Yes, it consolidates and supersedes all instructions listed in Annex 4, effective from July 1, 2011.
Are Regional Rural Banks covered under this circular?
No, the circular explicitly excludes RRBs from its application.
What are the key areas covered under capital market exposure?
The circular details components like advances against shares, IPO financing, investments in VCFs, and margin trading, with specific limits and risk management requirements.