New Delhi, 4 June (KNN) The Reserve Bank of India (RBI) has made changes in the guidelines on 'Large Exposures Framework' (LEF) for banks with a view to reduce the concentration of risk and align them with the global norms.

The new framework, however, also makes it possible for government entities to borrow more, as they will not be considered part of a group of connected entities.

The Central Bank released amendments that have been incorporated, the bank said in order to capture exposures and concentration risk more accurately and to align the above instructions with international norms.

Also the bank asserted that on exposures to NBFCs, banks’ exposures to a single NBFC will be restricted to 15% of their eligible capital base. However, based on the risk perception, more stringent exposure limits in respect of certain categories of NBFCs may be considered. Banks’ exposures to a group of connected NBFCs or group of connected counterparties having NBFCs in the group will be restricted to 25% of their Tier-I Capital.

The bank said that the board of banks may allow an additional 5% exposure of the bank's available eligible capital base in exceptional cases.

As per the revised norms, the sum of all the exposure values of a bank to a single counterparty must not be higher than 20% of the bank's available eligible capital base at all times.

The sum of all the exposure values of a bank to a group of connected counterparties must not be higher than 25% of the bank's available eligible capital base at all times in case of groups of connected counterparties, the RBI said.

Under the revised framework, exposure to counterparty will constitute both on and off-balance sheet exposures included in either the banking or trading book and instruments with counterparty credit risk.