RBI TO CAP BANKS’ GROUP EXPOSURE LIMIT AT JUST 25%

MUMBAI: The Reserve Bank of India proposes to cut banks’ group exposure limit by as much as 15 percentage points to reduce the systemic risk posed by lending too much to any single business house. This means that credit to any particular group will have to be restricted to 25% of a bank’s capital, down from 40% now. It’s not clear whether such a move will have any impact on borrowings by conglomerates, but the move should act as a protection against banks facing financial trouble in the event of borrowers being unable to repay their loans or collapsing. “Our current exposure limits to a group of borrowers is much higher at 40% of capital funds (plus 10% for infrastructure finance),” RBI said its annual report on Thursday.