Several of Reserve Bank of India’ (RBI’s) regulations for large exposures by banks are more stringent than the global ones, said the Bank for International Settlements (BIS).
The Bank for International Settlements is an international financial institution owned by central banks which fosters international monetary and financial cooperation and serves as a bank for central banks.
After conducting an assessment of the consistency of RBI’s rules for large exposures with global norms, the BIS made this observation.
“In some other respects, the Indian regulations are stricter than the Basel large exposures framework,” the BIS report said.
The Basel standard only applies to internationally active banks. However, the RBI applies the large exposures requirements to all banks except regional rural banks. These rural banks account for less than 3 percent of total loans outstanding for all commercial banks.
Under the Basel framework, exposures that must be deducted from the capital are not added to other exposures for that counterparty for the purpose of the large exposure limit. The RBI has not implemented this requirement, which increases the exposure size relative to the Basel standard, and so results in a stricter treatment.
(With inputs from a Business Website)