RBI/2004/245
DBOD No. BP. BC. No.91/21.01.002/2003-04
June 15, 2004
All Scheduled Commercial Banks (excluding RRBs)
Dear Sir,
Annual Policy Statement for the year 2004-05 -
Risk Weight for Exposure to Public Financial Institutions (PFIs)
In terms of guidelines issued vide
circular DBOD.BP.BC.103/21.01.002/98 dated October 31, 1998 risk weights on
investment in bonds/ debentures of select PFIs were prescribed at 20 per cent.
Banks were also advised that exposures to corporates, which are guaranteed by
select PFIs, would tantamount to exposure on those PFIs for capital adequacy
purposes and would consequently attract a risk weight of 20 per cent.
2. In this connection, a reference
is invited to paragraph 118 of the annual policy Statement for the year 2004-2005
enclosed to the Governor’s letter No. MPD. BC.249/07.01.01.279/ 2003-04 dated
May 18, 2004 (copy of the paragraph enclosed). Accordingly,
banks are advised that with effect from April 1, 2005, exposures to all PFIs
would attract a uniform risk weight of 100 per cent towards credit risk.
3. Please acknowledge receipt.
Yours faithfully,
(C R Muralidharan)
Chief General Manager-in-Charge
Extract from Annual
Policy Statement for the year 2004-05
"(d) Risk Weight for Exposure
to Public Financial Institutions
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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