The stricter capital norms would be applicable to Exim Bank, National Bank for Agriculture & Rural Development, National Housing Bank and Small Industries Development Bank of India from the next fiscal.
RBI said that these institutions should have minimum total capital at 9% from April 1 2022 along with minimum capital buffer at 2.5%. Minimum common equity tier 1 (CET1) capital would be 5.5% while minimum tier 1 capital requirement proposed at 7%.
“As the Indian economy grows further, the AIFIs are increasingly being seen as key institutions to promote the flow of direct or indirect credit to the economic sectors they cater to. It has been decided, therefore, to extend Basel III Capital framework to the AIFIs,” RBI said Friday in a draft master direction.
The regulator has sought comments on the same by November 30.
It said that these entities should should adopt the standardized approaches for measurement of capital charge for credit risk and market risk.
The insurance and non-financial subsidiaries, joint ventures or associates of an AIFI where it holds more than 10% of common share capital, should not be consolidated for the purpose of capital adequacy, the RBI said. The equity and other regulatory capital investments in the insurance and non-financial subsidiaries will be deducted from consolidated regulatory capital of the group.
Meanwhile, the regulator has proposed liberty for these entities for raising resources by way of issue of bonds, whether by public issue or through private placement, provided the minimum maturity of the bond is three years. However, prior permission would be needed for floating rate bonds in regard to ‘reference rate’ selected and the methods of floating rate determination.
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