While stipulating prudential limits on banks’ exposure to intra-group transactions and exposures — single and group — the Reserve Bank of India (RBI), on Tuesday, said that these guidelines would be effective from October 1.
For a single group entity, the RBI prescribed a limit of 5 per cent of paid-up capital and reserves in the case of non-financial companies and unregulated financial services companies and 10 per cent of paid-up capital and reserves in the case of regulated financial services companies.
For aggregate group exposure, the limit would be 10 per cent of the paid-up capital and reserves in the case of all non-financial companies and unregulated financial services companies taken together. It would be 20 per cent of the paid-up capital and reserves in the case of the group — all group entities (financial and non-financial) taken together.
“Banks should submit data on intra-group exposures to the RBI from the quarter ending December 31, 2014,” said the RBI in a notification .
In case a bank’s current intra-group exposure is more than the limits stipulated in the guidelines, “it should bring down the exposure within the limits at the earliest but not later than March 31, 2016,” said the RBI, adding, “the exposure beyond permissible limits subsequent to March 31, 2016, would be deducted from Common Equity Tier-1 capital of the bank.”
The guidelines may be reviewed by the RBI as and when the guidance on Intra-Group Transactions and Exposures (ITEs) is issued by the Basel Committee on Banking Supervision.
