Lending Policy and Exposure

norms

Loans & Advances Statutory &

Other Restrictions
Advances against bank's own shares
Advances to bank's Directors
Restrictions on loans to Companies for Buy-back
of Shares
Granting loans and advances to relatives of
Directors
Lending to directors and their relatives on
reciprocal basis
Restrictions on Grant of Loans & Advances and
awarding contract to Officers and Relatives of
Senior Officers of Banks

Policy framework on loans and

advances
Grant of Financial Assistance to Industries
Producing / Consuming Ozone Depleting
Substances (ODS)
Restrictions on Advances against Sensitive
Commodities under Selective Credit Control (SCC)
Restriction on payment of commission to staff
members
Restrictions on offering incentives on any banking
products

Policy framework on loans and

advances

To individuals (in physical form/Demat)

Stock Brokers and Commodity Brokers
Financing of IPO
Finance to assist employees to buy shares of their
own companies
Margin requirements
Advances to other borrowers against
shares/debentures/ bonds (newly established
units)

Policy framework on loans and

advances
Loans and advances to Real Estate Sector
Loans and advances to Micro and Small Enterprises
(MSEs)
Loan system for delivery of bank credit
Lending under Consortium/ Multiple Banking
Arrangement
Working Capital Finance to IT and Software Industry
Transfer of borrowal accounts from one bank to
another (Take over)
Staff accountability in quick mortality take over cases
Guidelines on Fair Practices Code for Lenders

EXPOSURE NORMS
Exposure
Exposure shall include credit exposure (funded
and non-funded credit limits) and investment
exposure (including underwriting and similar
commitments).
The
sanctioned
limits
or
outstandings, whichever are higher, shall be
reckoned for arriving at the exposure limit.
However, in the case of fully drawn term loans,
where there is no scope for re-drawal of any
portion of the sanctioned limit, banks may reckon
the outstanding as the exposure.

EXPOSURE NORMS

Credit Exposure
Credit exposure comprises the following
elements:
a) all types of funded and non-funded credit limits.
b) facilities extended by way of equipment leasing,
hire purchase finance and factoring services.

EXPOSURE NORMS
Capital Funds
Tier I and Tier II capital as per capital adequacy
standards
As per the published accounts as on March 31 of
the previous year.
Infusion of capital under Tier I and Tier II, after the
published balance sheet date will also be taken
into account
Accretions to capital funds by way of quarterly
profits would not be eligible for determining the
exposure ceiling.
Banks are prohibited from taking exposure in
excess of the ceiling in anticipation of infusion2 of

EXPOSURE NORMS
Group
The concept of 'Group' and the task of
identification of the borrowers belonging to a
groups is left to the banks/FI
The guiding principle being commonality of
management and effective control.
In case of public sector undertakings, only single
borrower exposure limit would be applicable.
In case of a split in the group, if the split is
formalised the splinter groube regarded as
separate groups.
If banks and FIs have doubts about the bona
3 RBI
fides of the split, a reference may be made to

EXPOSURE NORMS

Exemptions
Rehabilitation of Sick/Weak Industrial Units
The ceilings on single/group exposure limits are
not applicable to existing/additional credit
facilities (including funding of interest and
irregularities) granted to weak/sick industrial
units under rehabilitation packages.
Food credit
Borrowers, to whom limits are allocated directly
by the Reserve Bank for food credit, will be
exempt from the ceiling.
Guarantee by the Government of India
Not applicable where principal and interest 5are

EXPOSURE NORMS
Loans against Own Term Deposits
Should not be reckoned for computing
the exposure to the extent that the bank
has a specific lien on such deposits.
Exposure on NABARD
Will not be applicable to exposure
assumed by banks on NABARD. The
individual banks are free to determine the
size of the exposure to NABARD
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EXPOSURE NORMS

Limit
Single and Group Borrower Limits

Regulatory limit
i)
a)15 percent of capital funds in case of a single borrower and 40
percent of capital funds* in case of a group borrower
b) Additional 5%/10% incases of infrastructure projects
ii) Single Borrower Oil companies-25%
iii) Single NBFC / NBFC-AFC-10%/15%
iv) Single NBFC / NBFC-AFC- infrastructure -15%/20%

*Capital funds for the purpose

comprise of Tier I & Tier II

will

Substantial Exposure

Financing Indian Companies for acquisition of Equity

in Foreign Companies:
Limit for Exposure to Indian Joint Ventures / Whollyowned Subsidiaries Abroad and Overseas Step-down
subsidiaries of Indian corporates

20 percent of banks unimpaired capital funds (Tier I and

Tier II capital

EXPOSURE NORMS
Sensitive Sector Exposure Limits
Capital Market Exposure (CME):

The aggregate exposure to the capital

market in all forms (both fund based and
non-fund based) should not exceed 40% of
the Bank's net worth , as on March 31 of the
previous year.
Within this overall ceiling, direct investment
in shares, convertible bonds / debentures,
units of equity-oriented mutual funds and all
exposures to Venture Capital Funds (VCFs)
(both registered and unregistered) should
not exceed 20% of the Bank's net worth.

Exposure to Stock brokers and Market

makers
Exposure to any single stock broking entity
including its associates / inter-connected
companies and single broker

EXPOSURE NORMS
Commercial Real estate(CRE)
Residential Real estate(RRE)
Industry wise exposure:
Term Loan Exposure Limits:
Ratingwise advances
Geographical Limits
Net Unsecured Global Credit
Exposure
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EXPOSURE NORMS
Credit Exposure to Industry and certain Sectors
Internal Exposure Limits
Fixing of Sectoral Limits
Unhedged Foreign Currency Exposure of Corporates
Exposure to Real Estate
Exposure to Leasing, Hire Purchase and Factoring Services
Exposure to Indian Joint Ventures/Wholly-owned
Subsidiaries Abroad and Overseas Step-down Subsidiaries
of Indian Corporates
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EXPOSURE NORMS
Components of Capital Market Exposure (CME)
Banks' capital market exposures would include both their
direct exposures and indirect exposures. The aggregate
exposure (both fund and non-fund based) of banks to capital
markets in all forms would include the following:
direct investment in equity shares, convertible bonds, convertible debentures and units
of equity-oriented mutual funds the corpus of which is not exclusively invested in
corporate debt;
advances against shares/bonds/debentures or other securities or on clean basis to
individuals for investment in shares (including IPOs/ESOPs), convertible bonds,
convertible debentures, and units of equity-oriented mutual funds;
advances for any other purposes where shares or convertible bonds or convertible
debentures or units of equity oriented mutual funds are taken as primary security;
advances for any other purposes to the extent secured by the collateral security of
shares or convertible bonds or convertible debentures or units of equity oriented mutual
funds i.e. where the primary security other than shares/convertible bonds/convertible
debentures/units of equity oriented mutual funds does not fully cover the advances;

11

EXPOSURE NORMS
secured and unsecured advances to stockbrokers and
guarantees issued on behalf of stockbrokers and market
makers;
loans sanctioned to corporates against the security of
shares / bonds/ debentures or other securities or on clean
basis for meeting promoters contribution to the equity of
new companies in anticipation of raising resources;
bridge loans to companies against expected equity
flows/issues;
underwriting commitments taken up by the banks in respect
of primary issue of shares or convertible bonds or convertible
debentures or units of equity oriented mutual funds.
financing to stockbrokers for margin trading;
all exposures to Venture Capital Funds (both registered and
unregistered).
Irrevocable Payment Commitments issued by custodian banks
in favour of stock exchanges.
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EXPOSURE NORMS
Items excluded from Capital Market Exposure
The following items would be excluded from the
aggregate exposure ceiling of 40 per cent of net
worth and direct investment exposure ceiling of 20
per cent of net worth (wherever applicable):
Banks investments in own subsidiaries, joint
ventures, RRBs and investments in shares and
debentures, convertible bonds issued by institutions
forming crucial financial infrastructure such as
National Securities Depository Ltd. (NSDL), Central
Depository Services (India) Ltd. (CDSL), National
Securities Clearing Corporation Ltd. (NSCCL), NSE,
Clearing Corporation of India Ltd., (CCIL), NCDEX,
National Multi-Commodity Exchange of India Ltd.
(NMCEIL), National Collateral Management Services
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EXPOSURE NORMS
Tier I and Tier II debt instruments issued by other
banks;
Investment in Certificate of Deposits (CDs) of other
banks;
Preference Shares;
Non-convertible debentures and non-convertible
bonds;
Units of Mutual Funds under schemes where the
corpus is invested exclusively in debt instruments;
Shares acquired by banks as a result of conversion of
debt/overdue interest into equity under Corporate
Debt Restructuring (CDR) mechanism;
Term loans sanctioned to Indian promoters for
acquisition of equity in overseas joint ventures /
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Thank You