RBI issues large corporate exposure draft guidelines for banks


 

  • Banks will have to set aside higher provisions and assign higher risk weights for loans to large companies beyond a certain limit.
  • “Specified borrower” class has been defined as –  one that has aggregate fund-based credit limits (ASCL) of Rs.25,000 crore at the end of this financial year. This limit will progressively reduce toRs.15,000 crore in 2018-19 andRs.10,000 crore from the start of fiscal 2020.
  • RBI also proposes to create a normally permitted lending limit (NPLL), which is defined as 50% of the incremental funds raised by the borrower over and above the ASCL from the date it becomes a specified borrower.
  • For loans over the NPLL, banks will need to set aside an additional 3% provision. They will also have to assign additional risk weights as high as 75%.
  • This has implications to the capital ratios of the banks and essentially will increase the  cost of borrowing for these large corporates. In the absence of deep bond market, the corporates may still have to rely upon the banks for their funding needs or find alternative sources.
  • To further de-risk the banking sector from corporate loan exposures, the regulator is also considering capping a bank’s total exposure (including loans, on and off balance sheet items and market instrument investments) to a single corporate entity at 20% of its Tier-I capital, and for a group of connected companies at 25%. The current limit is 15% for a specific borrower and 40% for a connected group entity.

 

Former Wipro top exec Sangita Singh may join Infosys

  • According to a news article, Sangita Singh, ex-Wipro chief executive of Healthcare and life sciences, is expected to join Infosys as an EVP and head its ~$800Mn healthcare practice.
  • She will be replacing ex-Infosys VP Manish Tandon, who left earlier to CSS Corp as the CEO.
  • Her relationship with leading healthcare companies and Wipro’s top accounts such as Johnson & Johnson, Astra Zenca, Takeda etc. will be a positive for Infosys , in our view.
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