Exemption from LEF to Exposures to foreign sovereigns

Last updated: 25 February 2021

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The Reserve Bank of India (RBI) has announced an update to the Large Exposures Framework (LEF). Certain exposures to foreign sovereigns or their central banks will now be exempt from LEF. This exemption applies if the exposure is subject to a 0% risk weight and is denominated in the sovereign's domestic currency, funded by resources in that same currency.

Reserve Bank of India RBI/2020-21/104 DOR.No.CRE.BC.45/21.01.003/2020-21 February 24, 2021 All Scheduled Commercial Banks (Excluding Small Finance Banks, Payments Banks Local Area Banks and Regional Rural Banks) Dear Sir/Madam, Large Exposures Framework Exemptions Please refer tocircular No. DBR.No.BP.BC.43/21.01.003/2018-19 dated June 03, 2019on Large Exposures Framework (LEF) 2. Paragraph 3 of the Annex to the above circular specifies the exposures that are exempt from

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FAQ :

The notification clarifies exemptions from the Large Exposures Framework (LEF) for certain exposures to foreign sovereigns or their central banks.

All Scheduled Commercial Banks, excluding Small Finance Banks, Payments Banks, Local Area Banks, and Regional Rural Banks, are affected.

Exposures to foreign sovereigns or their central banks that are subject to a 0% risk weight and are denominated in the domestic currency of that sovereign, met out of resources of the same currency.

The exposure must be subject to a 0% risk weight under specific RBI circulars and be denominated in the foreign sovereign's domestic currency, funded by resources in that same currency.

Yes, it introduces further exemptions to the existing Large Exposures Framework.

Notification No : RBI/2020-21/104 DOR.No.CRE.BC.45/21.01.003/2020-21
Source : https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12036&Mode=0

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