2019] 37
Further,
if
the
exposure
in
each
of
the
underlying
assets
is
less
than
0. 25 %
of
bank’s^
eligible
capital
base,
the
exposure
may
be
assigned
to
the
structure
itself.
However,
if
a
bank
is
unable
to
identify
underlying
counterparties
in
a
structure:
u
bank’s
exposure
in
that
structure
is
0. 25 %
or
more
of
its
eligible
capital
base,^
the
bank
shall
assign
such
exposure
in
the
name
of
“unknown
client”.u
bank’s
exposure
in
that
structure
is
less
than
0. 25 %
of
its
eligible
capital
base,^
the
exposure
shall
be
assigned
to
the
structure
itself.
However,
if
the
exposure
of
bank
in
the
structure
is
less
than
0. 25 %
of
the
eligible^
capital
base
of
the
bank,
the
total
exposure
may
be
assigned
to
the
structure^
itself,
as
a
distinct
counterparty,
rather
than
looking
through
the
structure^
and
assigning
it
to
corresponding
counterparties.Overall impact of the LEF
The
primary
objective
of
LEF
is
to
limit
the
concentration
of
bank
in
a
single
group^
of
borrowers.
By
specifying
criteria
for
large
exposures,
determination
of^
“connected”
relationship,
reporting
to
RBI,
ways
to
mitigate
risk,
etc.,
the
LEF^
intends
to
reduce
credit
risk
of
banks
caused
due
to
concentration
in
a
single^
borrower
or
a
group
of
borrowers.
The
application
of
provisions
of
LEF
will
reduce
the
concentration
risk
of
banks^
which,
in
turn,
would
result
in
reduction
of
credit
risk
of
the
bank.
It
would^
also
result
in
increased
monitoring
by
the
RBI
on
the
lending
practices
of^
banks.
It
is
likely
to
reduce
the
instances
of
default
in
repayments,
which
have^
become
a
routine
practices
now-a-days.nn
LARGE EXPOSURES FRAMEWORK : NEW RBI RULES