RBI Updates: Large Exposures Framework for Non-Banking Financial Company – Upper Layer (NBFC-UL)

The guidelines shall be applicable to NBFC-UL, both at the solo level and at the consolidated (group) level.
Exposure shall comprise both on and off-balance sheet exposures by the NBFC-UL.

NBFC-UL’s exposure to all its counterparties and groups of connected counterparties, excluding the exposures listed below, will be considered for exposure limits. The exposures that are exempted from the LEF are listed below:

1. Exposure to the Government of India and State Governments which are eligible for zero percent risk weight under capital regulations applicable to NBFC-UL;
2. Exposure where the principal and interest are fully guaranteed by the Government of India;
3. NBFC-UL’s exposure to group entities that is deducted from its Owned Funds to arrive at the NOF.
4. Investment in the equity capital of the insurance company to the extent specifically permitted in writing by the Bank.

Regulatory reporting

NBFC-UL shall report its Large Exposures to the Reserve Bank (Department of Supervision, Central Office) as per the reporting template given . The LEF reporting shall cover the following:

1. all exposures, meeting the definition of large exposure;
2. all other exposures, measured as specified in paragraph 6 of this framework without offsetting exposure value with credit risk transfer instruments, where values stand equal to or above 10 percent of the NBFC-UL’s eligible capital base;
3. all the exempted exposures with values equal to or above 10 percent of the NBFC-UL’s eligible capital base;
4. 10 largest exposures included in the scope of application, irrespective of the values of these exposures relative to the NBFC-UL’s eligible capital base.

For Further information: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12298&Mode=0