The Reserve Bank of India (RBI) placed some new restrictions on banks' group exposure limits, including the single intra-group exposure limit at 10 percent of paid-up capital for regulated entities and 5 percent for unregulated ones.
It also placed an aggregate group exposure limit for intra-group transactions at 20 percent for all financial and non-financial entities in the group taken together and 10 percent for non-financial and unregulated entities.
These new rules will be applicable from October 1, 2014, the RBI said, adding that in case a bank's current intra-group exposure is more than the limits stipulated, it should bring down them down before March 31, 2016.
"The exposure beyond permissible limits subsequent to March 31, 2016, if any, would be deducted from Common Equity Tier 1 capital of the bank," the RBI said on Tuesday.
Copyright: Thomson Reuters 2014
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