Risk Weights

Special Risk Weights
Claims on corporates is risk weighted as per the availability of external ratings assigned by
RBI accredited Credit rating agencies. As such, unrated exposures to such entities attract a
risk weight of 100 per cent. RBI via its circular dated August 25, 2016 made following
modifications:
a) All unrated corporates having aggregate exposure from banking system of more than
Rs 200 crores would attract a risk weight of 150 per cent.
b) Also, claims on corporates having aggregate exposure of more than Rs 100 crores
which were rated earlier and subsequently unrated will also attract a risk weight of
150 percent.
NPLL –Normally Permitted Lending Limit under Large Exposure Framework
RBI has proposed a framework for addressing the concentration risk of the banking system
arising from its exposures towards single counterparty.
Terms:
a) ASCL: Aggregated sanctioned credit limit (ASCL) means the aggregate of the fund
based credit limits sanctioned or outstanding, whichever is higher, to a borrower by
the banking system. ASCL would also include unlisted privately placed debt with the
banking system.
b) Specified borrower : It means a borrower having an ASCL of more than
i. Rs.25,000 crore at any time during FY 2017-18;
ii. Rs.15,000 crore at any time during FY 2018-19;
iii. Rs.10,000 crore at any time from April 1, 2019 onwards
c) Reference date’, means the date on which a borrower becomes a ‘specified

borrower’.
d) NPLL : It means 50 percent of the incremental funds raised by the specified
borrower over and above its ASCL as on the reference date, in the financial years
(FYs) succeeding the FY in which the reference date falls. It would include funds
raised by way of equity.
For cases, where specified borrower has already raised funds through Market
Instrument*** and Outstanding in such instrument is more than 15 % of ASCL,
NPLL would be 60 % of the incremental funds raised.
***Market instruments, shall include bonds, debentures, redeemable preference shares and any other
non-credit liability, other than equity
Measures: From 2017-18 incremental exposures, for specified borrowers, beyond
NPLL would be subjected to following:
i. Additional provisions of 3 % over and above applicable provision on
incremental exposure from banking system, distributed in proportion to
each bank’s funded exposure to specified borrower.
ii. Additional risk weight of 75 % on exposure above the NPLL, distributed in
proportion to each bank’s funded exposure to specified borrower.
Guidelines on Loan System for Delivery of Bank Credit

With a view to enhance credit discipline among the large borrowers enjoying WC facility
from banking systems, below mentioned would be applicable:
i. Minimum level of ‘loan component’ and Effective date
In respect of borrowers having aggregate fund based working capital limit of ₹1500
million and above from the banking system, a minimum level of ‘loan component’ of 40
percent, in form of WCDL , of the sanctioned fund based working capital limit, including
ad hoc limits and TODs.
ii. Sharing of limits

All lenders in the consortium shall be individually and jointly responsible to make sure
that at the aggregate level, the ‘loan component’ meets the above mentioned
requirements. Under Multiple Banking Arrangements (MBAs), each bank shall ensure
adherence to these guidelines at individual bank level.
iii. Amount and tenor of the loan
The amount and tenor of the loan component may be fixed by banks in consultation with
the borrowers, subject to the tenor being not less than seven days.
iv. Repayment/Renewal/Rollover of Loan Component
Banks/consortia/syndicates will have the discretion to stipulate repayment of the WCLs

in instalments or by way of a "bullet" repayment
v. Risk weights for undrawn portion of cash credit limits
Effective from April 1, 2019, the undrawn portion of cash credit/ overdraft limits
sanctioned to the aforesaid large borrowers, irrespective of whether unconditionally
cancellable or not, shall attract a credit conversion factor of 20 percent.
Modifications in application of risk weights for RRP and RRE.
RRP: Regulatory retail portfolio
As per RBI circular dated October 12, 2020, the aggregate threshold retail exposure limit
was revised to Rs 7.5 crore from Rs 5 crores. Below is an illustrative example:
RRE: Residential Real Estate
The risk weights for all new housing loans to be sanctioned on or after October 16, 2020
and up to March 31, 2022 shall be as under:

Risk Weights

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Special Risk Weights

NPLL –Normally Permitted Lending Limit under Large Exposure Framework

iii. Rs.10,000 crore at any time from April 1, 2019 onwards

c) Reference date’, means the date on which a borrower becomes a ‘specified

Guidelines on Loan System for Delivery of Bank Credit

i. Minimum level of ‘loan component’ and Effective date

ii. Sharing of limits

iii. Amount and tenor of the loan

iv. Repayment/Renewal/Rollover of Loan Component

Banks/consortia/syndicates will have the discretion to stipulate repayment of the WCLs

v. Risk weights for undrawn portion of cash credit limits

RRP: Regulatory retail portfolio

RRE: Residential Real Estate

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