What changed
The RBI has extended the deferment of exposure limits for non-centrally cleared derivatives under the Large Exposures Framework (LEF) from the previous deadline to September 30, 2021. This means these derivatives will continue to be excluded from the LEF exposure limits until that date.
What it means for you
Banks can maintain their current levels of non-centrally cleared derivatives without worrying about breaching LEF limits for now. This provides operational relief and time to align risk management systems with future requirements, but banks should prepare for eventual compliance post-September 2021.
What you must do
- Review your bank's non-centrally cleared derivatives portfolio to ensure it remains within acceptable risk parameters.
- Plan for eventual compliance with LEF limits on these derivatives after September 30, 2021.
- Update internal risk management and reporting systems to track these exposures separately.
- Communicate the deferment to relevant treasury and risk teams to avoid confusion.
Who it affects
All Scheduled Commercial Banks (excluding Small Finance Banks, Payments Banks, Local Area Banks, and Regional Rural Banks)
What exactly is being deferred?
The application of exposure limits under the Large Exposures Framework (LEF) to non-centrally cleared derivatives is deferred until September 30, 2021.
Does this affect all banks?
No, it applies to all Scheduled Commercial Banks except Small Finance Banks, Payments Banks, Local Area Banks, and Regional Rural Banks.
What should banks do in the meantime?
Banks should use this period to review their derivative exposures and prepare systems for eventual compliance with LEF limits after the deferment ends.