RBI CIRCULAR ON CAPITAL ADEQUACY – RISK WEIGHTAGE ON LENDING THROUGH COLLATERALIZED BORROWING AND LENDING OBLIGATION (CBLO)

DEC 4, 2009



DNBS.PD/ CC.No.165/03. 05.002/2009- 10 December 1, 2009

Capital Adequacy – Risk weightage on Lending through
Collateralized Borrowing and Lending Obligation (CBLO)

Investing by NBFCs in instruments like Collateralized Borrowing
 and Lending Obligations (CBLOs) results in their exposure to
 Central Counter Parties (CCPs) like Clearing Corporation of India Ltd. (CCIL).

2. It is therefore clarified that the counterparty credit risk,
 arising out of exposure of NBFCs to CCIL on account of
securities financing transactions (CBLOs) will carry a risk
weight of zero, as it is presumed that the CCP’s exposures
to their counterparties are fully collateralised on a daily basis,
thereby providing protection for the CCP’s credit risk exposures.
The deposits / collaterals kept by NBFCs with CCIL
will attract a risk weight of 20%.

3. A copy each of amending Notifications No. DNBS. 211 / CGM (ANR)-2009 and
 Notification No. DNBS. 212/CGM (ANR)-2009 both dated
 December 1, 2009 is enclosed.
Yours sincerely,
(A. Narayana Rao)
Chief General Manager-in-Charge
Encl: As above

RESERVE BANK OF INDIA/
DEPARTMENT OF NON-BANKING SUPERVISION
CENTRAL OFFICE
CENTRE I, WORLD TRADE CENTRE,
CUFFE PARADE, COLABA,
MUMBAI 400 005.
Notification No. DNBS. 211 / CGM (ANR)-2009 dated December 1, 2009
In exercise of the powers conferred by Sections 45J, 45JA, 45K and 45L of the
Reserve Bank of India Act, 1934 and of all the powers enabling it
 in this behalf, and in partial modification of its
 Notification No. DNBS. 192 dated DG (VL)-2007 dated
 February 22, 2007, the Reserve Bank hereby notifies as follows, namely-
In the Notes under (v) (d) of Explanations (1) of paragraph 16, the
 following shall be added after sub clause (3):
“(4) The counterparty credit risk, arising out of exposure
 of NBFCs to CCIL on account of securities financing
 transactions (CBLOs) will carry a risk weight of zero,
 as it is presumed that the CCP’s exposures to their
counterparties are fully collateralised on a daily basis, thereby
providing protection for the CCP’s credit risk exposures.
The deposits / collaterals kept by NBFCs with CCIL will attract a risk weight of 20%”.
(A. Narayana Rao)
Chief General Manager in Charge
RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING SUPERVISION
CENTRAL OFFICE
CENTRE I, WORLD TRADE CENTRE,
CUFFE PARADE, COLABA,
MUMBAI 400 005.
Notification No. DNBS. 212 / CGM(ANR)-2009 dated December 1, 2009
In exercise of the powers conferred by Sections 45J, 45JA, 45K and
 45L of the Reserve Bank of India Act, 1934 and of all the powers
 enabling it in this behalf, and in partial modification of its
Notification No. DNBS. 193 dated DG (VL)-2007 dated
February 22, 2007, the Reserve Bank hereby notifies as follows, namely-
In the Notes under (v) (d) of Explanations (1) of paragraph 16,
the following shall be added after sub clause (3):
“(4) The counterparty credit risk, arising out of exposure of
NBFCs to CCIL on account of securities financing transactions
(CBLOs) will carry a risk weight of zero, as it is presumed
that the CCP’s exposures to their counterparties are fully
 collateralised on a daily basis, thereby providing protection for
the CCP’s credit risk exposures. The deposits / collaterals
 kept by NBFCs with CCIL will attract a risk weight of 20%”.
(A. Narayana Rao)
Chief General Manager in Charge