Banks air concern on RBI credit rules to large borrowers

Kolkata, Aug 27 (PTI) Banks have raised concerns onReserve Bank of India’s new norms for bank exposure to largecorporate entities, particularly in large infrastructureprojects. "The new norms will have definite impact on largeinfrastructure projects. We as an industry have raisedconcerns with the RBI Governor and asked to look into it," SBImanaging director (compliance & risks) P K Gupta said at thebanking summit organised by Indian Chamber of Commerce here. There could be some concerns for financing largeinfrastructure projects, particularly greenfield projects, helater told newsmen. As per the new RBI norms, which will come into affect fromApril 1, 2017, incremental exposure of banking system to aspecified borrower beyond normally permitted lending limit(NPLL) will be deemed to carry higher risk which will berecognised by way of additional provisioning and higher riskweight. Borrower with an aggregate of the fund-based creditlimits (ASCL) of more than Rs 25,000 crore at any time during2017-18 banking system can only lend up to 50 per cent of theincremental fund requirements and remaining have to be raisedfrom the market or equity, Gupta said. He indicated that for large infrastructure projectsability to raise funds from market before completion could getrestricted due to reasons like not having credit rating. The exposure limit will get reduced to Rs 15,000 crore atany time during 2018-19 and Rs 10,000 crore at any timefrom April 1, 2019. RBI proposes to create NPLL, which is defined as 50per cent of the incremental funds raised by the borrower overand above ASCL from the date it becomes a specified borrower. For loans over the NPLL, banks will need to set asidean additional three per cent provision. They will also have toassign additional risk weights as high as 75 per cent. Thisadditional risk weight will also be distributed in proportionto the individual bankÂ’s funded exposure. Bandhan Bank CMD C S Ghosh said RBI’s proposal willhelp reduce the banks’ exposure to large corporate entities.PTI BSM KKMR