RBI asks banks to cut exposure to gold-loan NBFCs :Business Line

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The Reserve Bank of India on Friday further tightened the norms pertaining to banks exposure to non-banking finance companies predominantly in the gold loans business.

Banks have been asked to reduce their regulatory exposure ceiling on a single NBFC, having gold loans to the extent of 50 per cent or more of its total financial assets, from the existing 10 per cent to 7.5 per cent of their capital funds.

EXPOSURE CEILING

The exposure ceiling, however, can go up by 5 per cent to 12.5 per cent of banks' capital funds if the additional exposure is on account of funds on-lent by NBFCs to the infrastructure sector, said a RBI circular.

Banks which currently have an exposure to NBFCs in the gold loans business in excess of the regulatory ceiling will be required to reduce it within the prescribed limit.

Banks are now required to have an internal sub-limit on their aggregate exposures to all gold loan companies taken together. The sub-limits should be within the internal limit fixed by banks for their aggregate exposure to all NBFCs put together.