RBI says no to special exposure relaxations for state NBFCs

Mumbai: The Reserve Bank of India (RBI) has rejected calls by stakeholders to continue case-specific exemptions from concentration norms for government-owned NBFCs, saying that doing so goes against a principles-based framework and creates avoidable regulatory uncertainty. In amended directions published Wednesday, the central bank also rejected requests for an increase in single counterparty limits for exposures to public sector enterprises.

"While a case-by-case exemption was permitted earlier, most of such exemptions had a sunset clause which has since expired, and the exposure of these entities have been brought within limits," the RBI said.

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The RBI has, however, allowed any residual breaches under the revised concentration norms to be grandfathered. "Further, such exposures can be offset by using eligible credit risk transfer instruments such as state government guarantees," it said.

The RBI has allowed government-owned NBFCs to breach their single and group exposure limits provided these are run off until maturity and that net incremental exposure remains unchanged.

In amended directions, the RBI also increased the large exposure limit for infrastructure finance companies (IFCs) in the upper layer to 45% from 35% of the capital base.