RBI/ 2004/ 248 UBD. No. BPD. PCB. Cir. 52 / 09.116.00/2003-04
June 15, 2004
The Chief Executive Officers of
all Primary (Urban) Co-operative Banks
Dear Sir,
Risk Weight for Exposure to Public
Financial Institutions (PFIs)
Please refer to Sr. No. 8 of II
Investment of (A) Funded Risk Assets (Domestic Operations) of Annexure 1 enclosed
to our Circular UBD. POT. PCB. Cir. No. 45/09.116.00/2000-01 dated April 25,
2001 wherein Urban Co-operative Banks were advised that their investments in
bonds/debentures of certain PFIs would attract a uniform risk weight of 22.5
per cent.
2. In this connection, a reference
is invited to para 118 of the Annual Policy Statement for the year 2004-05 (paragraph
reproduced in the Annexure) announced by the Governor on May 18, 2004. The
full text of the policy is available at RBI website (www.rbi.org.in).
3. Accordingly, it has been decided
that with effect from April 1, 2005, exposures to all PFIs will attract a risk
weight of 100 per cent for credit risk. They will also attract a risk weight
of 2.5 per cent for market risk.
4. Please acknowledge receipt to
our concerned Regional Office.
Yours faithfully,
Sd/-
(N. S. Vishwanathan )
Chief General Manager
Encl: 1
EXTRACT FROM ANNUAL
POLICY 2004-05
Risk Weight for Exposure to Public Financial Instituions
118. At present, exposures of banks/FIs
to specified public financial Institutions (PFIs) attract a risk weight of 20
per cent for capital adequacy purposes. The financial positions of PFIs are
divergent. As such, preferential treatment to PFIs for capital adequacy purposes
on a privileged basis is not justified. Accordingly, it is proposed that :
- With effect from April 1, 2005, exposures on
all PFIs will attract a risk weight of 100 per cent.
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