What changed
The RBI has amended the prudential norms on capital adequacy for All India Financial Institutions. A new paragraph 29A has been inserted, which states that exposures guaranteed under ECLGS 5.0 will attract a risk weight of zero percent to the extent of 75% of the guaranteed portion. The remaining exposure will attract risk weight as per extant guidelines.
What it means for you
This amendment is expected to provide relief to lenders by reducing their capital requirements for ECLGS 5.0 exposures. It may also encourage lenders to extend more credit under the scheme, thereby supporting MSMEs and other eligible borrowers. The amendment may have a positive impact on the overall credit growth in the economy.
What you must do
- Review your bank's exposure to ECLGS 5.0
- Assess the impact of the amendment on your bank's capital requirements
- Consider increasing lending under ECLGS 5.0
Who it affects
All India Financial Institutions, Lenders under ECLGS 5.0, MSMEs and other eligible borrowers
What is ECLGS 5.0?
ECLGS 5.0 is the Emergency Credit Line Guarantee Scheme introduced by the Government of India.
What is the risk weight for ECLGS 5.0 exposures?
Exposures guaranteed under ECLGS 5.0 will attract a risk weight of zero percent to the extent of 75% of the guaranteed portion.