Skip to content
Free updates Login
BankingNABARD / RBI

RBI Scraps 2016 Cap on Banking-System Exposure to Big Borrowers

3 October 20251 min read
BANKING & FINANCERBI Scraps 2016 Capon Banking-SystemExposure to BigBorrowers3 October 2025safalsetu.com

Why in the news

RBI scrapped a 2016 rule limiting the whole banking system’s lending to one big borrower, while keeping bank-level limits.

Key facts

  • The old rule curbed concentration risk; its cap went ₹25,000 crore (FY18), ₹15,000 crore (FY19), ₹10,000 crore (from FY20).
  • RBI says it is no longer needed for financial stability; removal cuts compliance burden.
  • Corporate loan demand stays muted (slow capex, bond and ECB funding, strong cash); some lending may go to infrastructure and MSMEs.

Possible effect

About ₹3-4.5 trillion could return to banks from bonds and ECBs.

Exam angle

  • Remember 2016 and the Tier-1 limits.

Test yourself

1. Which year's RBI circular on system-level lending limits to large corporates was withdrawn in October 2025?

RBI withdrew its 2016 circular but kept bank-level large exposure limits.

2. Under the continuing large exposure framework, what is the limit for a corporate group as a share of a bank's Tier-1 capital?

Single borrower limit is 20%; corporate group limit is 25%.

3. What was the system-level cap on bank credit to a large corporate from FY20, under the withdrawn RBI circular?

The cap went from ₹25,000 crore to ₹15,000 crore and then ₹10,000 crore from FY20.

This topic is part of Daily Current Affairs 2 & 3 October 2025 (15 topics).

All topics of the dayDay quizOctober 2025

Read more