The Reserve Bank of India (RBI) has released Circular RBI/2023-24/112dated January 15, 2024, addressing Credit/Investment ConcentrationNorms for Non-Banking Financial Companies (NBFCs), including HousingFinance Companies. The circular establishes guidelines for NBFCs,specifically NBFC-Middle Layer (NBFC-ML), requiring the computation ofaggregate exposure to a counterparty based on on-balance sheet and offbalance sheet exposures. Credit Risk Transfer Instruments, including cashmargin, government-guaranteed claims, and specified guarantees, arepermitted for offsetting exposures. Exemptions from credit/investmentconcentration norms are outlined, and disclosure requirements forexceeding prudential exposure limits have been clarified. Additionally,NBFC-Base Layer (NBFC-BL) is mandated to formulate an internal Boardapproved policy for credit/investment concentration limits, aligning withNBFC-ML guidelines, while NBFC-Upper Layer (NBFC-UL) follows creditrisk transfer instruments specified in the Master Direction on NBFC.
Effective immediately, the circular aims to ensure uniformity andconsistency in computing concentration norms among NBFCs. Theguidelines emphasize the importance of eligible guarantees being direct,explicit, irrevocable, and unconditional for credit risk transfer instruments.All other terms and conditions for the Large Exposures Framework (LEF)and credit/investment concentration norms remain unchanged. Fordetailed information and compliance, NBFCs are directed to refer toCircular RBI/2023-24/112 issued on January 15, 2024.
Originally published 27 March 2024
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