RBI Exempts Foreign Sovereign Exposure from LEX Framework

Exposures to foreign sovereigns or their central banks that are subject to a zero percent risk weight will be exempted from the large exposures framework.

The RBI (Reserve Bank of India) has decided to exempt scheduled commercial banks’ exposure to foreign sovereigns or their central banks from the large exposure framework.

Under the framework, a bank’s exposure to a group of connected companies are limited to 25 percent of its core capital, and to an individual company at 20 percent.

In a notice, the RBI said exposures to foreign sovereigns or their central banks that are subject to a zero percent risk weight, denominated in the sovereign’s domestic currency, and met out of resources of the same currency are exempt from the large exposures framework.

The notice does not apply to small finance banks, payments banks, local area banks and regional rural banks.

Regulation HK

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