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RBI has allowed NBFCs classified as middle and base layer entities, to utilise credit risk mitigation tools to offset their exposure with eligible credit risk transfer instruments.
The step has been taken to harmonise norms across NBFCs; currently, upper layer NBFCS under the Large Exposures Framework, are permitted to use Credit Risk Mitigation (CRM) instruments to reduce their exposure to a counterparty.
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“With a view to harmonise credit concentration norms among NBFCs, it has been decided to permit NBFCs in the Middle and Base Layers also to use CRM instruments to reduce their counterparty exposure under the credit concentration norms,” Governor Shaktikanta Das said in his statement on Friday.
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Large Exposure Framework norms allow upper layer NBFCs’ exposure to the original counterparty to be offset with certain credit risk transfer instruments. However, there is no such mechanism at present for other NBFCs.
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