RBI Large Exposures Framework: Tighter Norms for Foreign Banks
Why in the news
RBI revised exposure rules so Indian branches of foreign lenders count group exposures strictly, reducing concentration risk and raising transparency.
Key facts
- No exemptions: exposures to the parent group are ordinary counterparty exposures.
- Intragroup limits are tighter, so branches avoid over-reliance on the parent or overseas network.
- Gross basis for all affiliate transactions, even if centrally cleared; netting is barred, avoiding understated counterparty risk.
- Effective 1 April 2026; voluntary early adoption permitted.
Why RBI acted
- Heavy dependence on head-office funding creates concentration risk.
- Alignment with global best practice.
- Strong local buffers and risk discipline.
Exam angle
- Framework: LEF.
- Date: 1 April 2026.
- Key term: gross versus netting.