The Reserve Bank of India has unveiled a large exposures framework for upper layer non-banking finance companies. The guidelines will be applicable to NBFC-UL, both at the solo level and at the consolidated (group) level.
According to the guidelines, the sum of all the exposure values of an NBFC placed in the upper layer to a single counterparty, and to a group of connected counterparties, must not be higher than 20% and 25% respectively, of its available eligible capital base.
The board of the NBFC-UL may allow additional 5% exposure beyond 20% but at no time higher than 25% of the NBFC-UL’s eligible capital base, subject to the following conditions: NBFC-UL has a policy approved by its board of directors setting out conditions under which exposure beyond 20% may be considered; and NBFC-UL shall record in writing the exceptional reasons for which exposure beyond 20% is being allowed in a specific case. An infrastructure finance company (IFC) may further exceed the exposure limit by 5% of Tier I capital for exposure to a single counterparty, and by 10% of its Tier-I capital for exposure to a group of connected counterparties.
An NBFC-UL may exceed the exposure limit by 5% of its Tier I capital for exposure to a single counterparty if the additional exposure is on account of infrastructure ‘loan and/ or investment’.
However, the single counterparty limit shall not exceed 25% in any case for NBFC-UL (other than IFC) and 30%for NBFC-UL (IFC), as per the framework guidelines.
