Page 54 - Banking Finance October 2022

RBI CIRCULAR

RBI/2022-23/115 shall be applicable in respect of exposures guaranteed
under any existing or future schemes launched by
September 15, 2022
CGTMSE, CRGFTLIH and NCGTC satisfying the following
1. Please refer to A.P. (DIR Series) Circular No. 120 dated conditions:
April 10, 2014 on ‘Rupee Drawing Arrangement – i. Prudential Aspects: The guarantees provided
Direct to Account Facility’, in terms of which, foreign under the respective schemes should comply with
inward remittances received under Rupee Drawing the requirements for credit risk mitigation in terms
Arrangement (RDA) can be transferred to the KYC of paragraph 7.5 of the Master Circular on Basel
compliant beneficiary bank accounts through electronic III Capital Regulations dated April 1, 2022 which
mode, such as, NEFT, IMPS, etc. subject to the inter alia requires such guarantees to be direct,
procedure and conditions mentioned therein. explicit, irrevocable and unconditional;
2. As announced in Para 6 of the Statement on ii. Restrictions on permissible claims: Where the
Developmental and Regulatory Policies issued on August terms of the guarantee schemes restrict the
05, 2022, it has been decided to allow foreign inward maximum permissible claims through features like
remittances received under the Rupee Drawing specified extent of guarantee coverage, clause on
Arrangement (RDA), to be transferred to the KYC first loss absorption by member lending institutions
compliant bank account of the biller (beneficiary) (MLI), payout cap, etc., the zero percent risk
through Bharat Bill Payment System (BBPS), subject to weight shall be restricted to the maximum
the conditions mentioned in Para 3 of A.P. (DIR Series)
permissible claim and the residual exposure shall
Circular No.120 dated April 10, 2014.
be subjected to risk weight as applicable to the
3. AD Cat-I Banks may bring the contents of this circular counterparty in terms of extant regulations.
to the notice of their constituents concerned.
iii. In case of a portfolio-level guarantee, effective
4. The directions contained in this circular have been from April 1, 2023, the extent of exposure
issued under Section 10(4) and Section 11(1) of the subjected to first loss absorption by the MLI, if any,
Foreign Exchange Management Act, 1999 (42 of 1999) shall be subjected to full capital deduction and the
and are without prejudice to permissions/approvals, if residual exposure shall be subjected to risk weight
any, required under any other law. as applicable to the counterparty in terms of
extant regulations, on a pro rata basis. The
(Vivek Srivastava) maximum capital charge shall be capped at a
Chief General Manager notional level arrived at by treating the entire
exposure as unguaranteed.
Review of Prudential Norms – Risk
3. Further, subject to the aforementioned prescriptions at
Weights for Exposures guaranteed by paragraph 2 above, any future scheme launched under
Credit Guarantee Schemes (CGS) any of the aforementioned Trust Funds, in order to be
eligible for zero percent risk weight, shall provide for
RBI/2022-23/113
settlement of the eligible guaranteed claims within
September 07, 2022 thirty days from the date of lodgement, and the
lodgement shall be permitted within sixty days from the
1. Please refer to paragraph 5.2 of the Master Circular
date of default.
on Basel III Capital Regulations dated April 1, 2022 in
4. Some illustrative examples of risk weights applicable on
terms of which banks are permitted to apply zero
claims guaranteed under specific existing schemes are
percent risk weights in respect of claims on Credit
given in the Annex.
Guarantee Fund Trust for Micro and Small Enterprises
(CGTMSE), Credit Risk Guarantee Fund Trust for Low 5. The above regulatory stipulation shall be applicable to
Income Housing (CRGFTLIH) and individual schemes all the regulated entities to whom this circular is
under National Credit Guarantee Trustee Company Ltd addressed, to the extent these entities are recognised
(NCGTC). as eligible MLIs under the respective schemes.
2. In order to have a consistent approach with regard to
risk weights for exposures guaranteed by such Trust (Manoranjan Mishra)
Funds, it is advised that the risk weight of zero percent Chief General Manager

54 | 2022 | OCTOBER | BANKING FINANCE