2019] 35
Further,
borrowers
who
operate
as
special
purpose
vehicles,
securitisation
structures^
or
other
structures
having
investments
in
underlying
assets
would
also^
be
affected
as
the
banks
will
now
look-through
the
structure
to
identify
the^
counter-party
corresponding
to
the
underlying
asset.
However,
the
LEF
does
not
address
issues
relating
to
lending
to
any
specific
sector^
or
such
other
exposures.
What happens to affected borrowers?
The
borrowers
taking
advantage
of
corporate
veil
will
no
more
be
able
to
avail^
of
funds
under
the
veil.
The
entities
having
same
or
related
parties
in
their^
management
shall
not
be
able
to
avail
of
funds
exceeding
the
exposure
limit.^
This
would
result
in
shrinkage
of
the
availability
of
borrowed
funds
that
would^
have
otherwise
been
available
to
the
entities.
Also,
entities
operating
as
aforementioned^
structures,
are
likely
to
face
contraction
of
borrowed
fund
availability.^Global framework
The
global
framework
on
large
exposures
called
the
Supervisory
framework
for^
measuring
and
controlling
large
exposures
became
applicable
from
1 st
Jan.^
2019.
The
key
features
of
the
global
framework
are
as
follows:u
Norms
for
determining
scope
of
counter-parties
and
exemptions
thereto.u
Specification
of
limits
of
large
exposures
and
reporting
requirements.u
The
sum
of
exposure
to
a
single
borrower
or
a
group
of
connected
bor
rowers -
shall
not
exceed
25 %
of
bank’s
available
capital
base.u
A
G-SIB
(Global
systemically
Important
Banks)
shall
not
exceed
exposure
limit^
of
15 %
of
its
available
capital
base
in
another
G-SIB.u
Principles
for
measurement
of
value
of
exposures.u
Techniques
for
mitigation
of
credit
risk.u
Treatment
of
sovereign
exposures,
inter-bank
exposures,
exposures
on
covered^
bonds
collective
investment
schemes,
securitisation
vehicles
or
other^
structures
having
underlying
assets
and
in
central
counter-parties
been^
specified.“Connected” borrowers
A
bank
shall
lend
within
concentration
limits
prescribed
in
the
LEF.
For
this
purpose,^
the
aggregate
of
concentration
in
all
the
connected
counterparties
shall^
be
considered.
Basically,
connected
counterparties
are
those
parties
which^
have
such
a
relationship
among
themselves,
either
by
way
of
control
or^
interdependence,
that
failure
of
one
of
them
would
result
in
failure
of
the
other^
too.
The
LEF
provides
the
following
criteria
for
determining
the
“con
nected” -
relationship
between
counterparties.LARGE EXPOSURES FRAMEWORK : NEW RBI RULES