Foreign Banks Seek RBI Relief on Risk Weights, PSL and Domain Rules
Why in the news
Foreign bank heads gave the RBI feedback on operating hurdles and asked for relaxations in lending-related norms.
Key requests
| Area | Current position | Request |
|---|---|---|
| Risk weight | Unrated corporate loans above ₹200 crore: 150% (rated corporates: 30-100%) | Weight based on the parent company’s rating |
| Priority sector lending | 40% target for banks with 20+ branches; smaller banks get relaxation (up to 32% in export credit); 5% cap on PSL via NBFCs | Extend flexibility to more banks; double the 5% cap |
| On-lending via NBFCs | Agri loans via NBFCs permitted up to a limit | Raise the permitted amount |
| bank.in domain | Mandatory move to the bank.in domain | Exempt non-retail-facing banks |
About foreign banks
They are headquartered abroad with a branch or subsidiary in India, operate under Indian law and RBI rules, and are governed by the Banking Regulation Act, 1949, FEMA, 1999 and RBI Master Directions.
Exam angle
- Meeting held with RBI Governor Sanjay Malhotra.
- PSL target: 40% for foreign banks with 20+ branches.
- Risk weight issue: 150% on unrated large corporate loans.