Risk to banks and borrowers in innovative upfront disbursal of housing loans
Some banks have introduced innovative Housing Loan Schemes in association with developers/builders. The normal process of these schemes, is upfront disbursal of sanctioned individual housing loans to the builders without linking the disbursals to various stages of construction of the housing project, Interest/EMI on the housing loan availed of by the individual borrower being serviced…
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Risk weights of 100 or 150% apply when ECAI rating actions are devoid of the lenders’ details: RBI
Updated on November 17, 2023 RBI on Thursday (November 17, 2023) increased risk weights on consumer credit exposure of banks, and NBFCs to 125% from 100%. Measures announced to contain the risk emanating from a sharp rise in unsecured loans – mostly personal loans and credit cards. It has been also decided to increase the…
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Discussion Paper on Expected Loss Based Approach for Loan Loss Provisioning by Banks
In the Statement on Developmental and Regulatory Policies announced by RBI on Friday, RBI said that as a step towards converging with globally accepted prudential norms, it will issue a discussion paper on the proposed transition for stakeholder comments. Banks currently follow the incurred loss approach for provisioning on their loan assets, whereby provisions on…
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RBI issues guidelines to market participants regarding exchange of variation margin (VM) for NCCDs
In today’s (June 8, 2022) statement of development and regulatory policies the Reserve Bank of India issued guidelines to market participants regarding the exchange of variation margin (VM) for non-centrally cleared derivatives (NCCDs). Derivatives are financial instruments whose value is derived from other underlying assets. There are mainly four types of derivative contracts such as…
Read article SBI, ICICI, and HDFC banks are too big to fail: RBI
The Reserve Bank of India today announced that State Bank of India, HDFC Bank, and ICICI Bank will remain as Domestic Systemically Important Banks (D-SIBs) and therefore will have to maintain additional common equity tier 1 (CET1) capital ratios in the same manner prescribed in 2020. SIBs are considered as banks that are ‘too big…
Additional Tier1 capital: Eligible limit for Foreign Currency/Rupee denominated Bonds overseas
RBI on Monday clarified on criteria for the Inclusion of Perpetual Debt Instruments (PDI) in Additional Tier 1 Capital under Basel –III capital regulations. The issue was examined by the regulator as ‘several banks have approached us to clarify the maximum amount of capital funds that can be raised overseas’ the circular said. The Central…
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