RBI updates foreign bank exposure norms, LEF rules and credit reporting framework

Reserve Bank of India Issues Clarification on Prudential Treatment of Foreign Bank Branches

The Reserve Bank of India (RBI) has issued clarification on prudential treatment of exposures of foreign bank branches operating in India to their group entities. The clarification comes alongside a set of amendments to various other regulations.

Key Highlights of the Amendments

• Large Exposures Framework (LEF): The RBI has issued amendments to the LEF, which includes methodological aspects relating to the calculation of LEF and intragroup transactions and exposures (ITE).
• Concentration Risk Management: Banks are required to have policies on concentration risk management of their exposures towards a single counterparty, groups of interconnected counterparties, specific sectors of the economy.
• Ultra-Large Borrowers: Banks are required to have systems to monitor and address the risks emanating from their exposures to ultra-large borrowers. The criteria for deciding an ultra-large borrower will be determined by the banks themselves, but must take into account the overall borrowings of such entities from the banking system.

Other Amendments

The RBI has issued several other amendments to regulations, including:

• RBI (Commercial Banks - Credit Facilities) Amendment Directions, 2025: This amendment aims to ensure a streamlined and harmonised set of regulations for domestic and exporter jewellers, enhancing ease of doing business and developing a supervisory management information system on gold metal loans.
• Credit Information Reporting Process: The RBI has issued 10 amendment directions to modify the extant instructions relating to credit information reporting process for different regulated entities, including banks and NBFCs.

Objective of the Amendments

The objective of the 10 amendment directions is to ensure more frequent, accurate and timely reporting of credit information by Credit Institutions (CIs) to Credit Information Companies (CICs), thereby improving the quality and recency of CIRs used in credit underwriting and monitoring.

Impact of the Amendments

The amendments aim to improve the quality and recency of credit information reports (CIRs) used in credit underwriting processes, which will have a positive impact on the Indian economy.