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RBI Large Exposures Framework: Tighter Norms for Foreign Banks

6 December 20251 min read
BANKING & FINANCERBI Large ExposuresFramework: TighterNorms for ForeignBanks6 December 2025safalsetu.com

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.

Test yourself

1. RBI tightened which framework in December 2025 to curb concentration risk of foreign banks in India?

The amendments were made to the Large Exposures Framework (LEF).

2. From which date do RBI's revised Large Exposures Framework norms for foreign banks take effect?

The revised norms come into effect on 1 April 2026.

3. Under RBI's revised norms, how must transactions with overseas affiliates of foreign banks be calculated?

All such transactions must be measured gross, with no netting allowed.

This topic is part of Daily Current Affairs 5 December 2025 (13 topics).

All topics of the dayDay quizDecember 2025

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