Context:
The Reserve Bank of India (RBI) enforces various restrictions on loans and credit exposure to maintain financial stability and prevent fund misuse. These include loan limits, credit exposure norms, and other restrictions.
Loan Limits
- NBFCs: Limited to cash loan payouts of Rs 20,000.
- Working Capital Credit: For borrowers with Rs 5 crore or more in working capital credit limits, book-debt financing must not exceed 75% of the sanctioned limit.
Credit Exposure Norms
- Individual Borrowers: Credit exposure cannot exceed 15% of a financial institution’s capital funds.
- Infrastructure Projects: Exposure can exceed 15% by up to 5 percentage points.
- Exceptional Cases: An additional 5% of capital funds may be extended.
Other Restrictions
- Stockbrokers & Commodity Brokers: Banks cannot extend credit to them.
- Multiple Bank Loans: A “No Objection Certificate” (NOC) must be obtained before financing a borrower who already has credit facilities with another bank.
- Loans Against Shares: Lenders must maintain a Loan to Value (LTV) ratio of 50%.
- Credit Volume Regulation: RBI controls the total volume of credit that commercial banks can provide.
