RBI tightens lending norms for larger corporates

Reserve Bank of India (RBI) has tightened the rules for bank's lending to large corporate entities. The rule is applicable from April 1, 2019. According to the new norms, banks can lend loans or take exposure to one company only to the extent of 20 percent of their capital and they can lend loans to an entire corporate group only to the extent of 25 percent of their own capital.
However, in exceptional cases, board of banks may allow an additional 5 percent exposure of the bank’s available eligible capital base. "The sum of all the exposure values of a bank to a group of connected counterparties must not be higher than 25 percent of the bank's available eligible capital base at all times," RBI said, adding banks must lay down a board approved policy in this regard.

In an interview to CNBC-TV18, RK Bansal, ED, IDBI Bank, said that there is no great change and RBI's intention remains the same of reducing exposure. He added that banks have time for the transition and individual company wise the limit has gone up. Earlier it was 15 percent and now it is 20 percent. He also said that in cases of non-stressed groups banks have the option to convert into other instruments and that is what RBI wants.Watch video for more...