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      Question

      An Upper Layer NBFC (other than an Infrastructure

      Finance Company) can exceed its baseline single counterparty limit of 20%, up to a maximum of 25%, under what condition?
      A Automatically if the counterparty holds an active international AAA credit rating Correct Answer Incorrect Answer
      B With explicit Board approval, provided the additional 5% exposure is channeled into infrastructure loans or investments Correct Answer Incorrect Answer
      C If the target counterparty belongs to a state-controlled public sector sovereign utility Correct Answer Incorrect Answer
      D If the financing entity completely nets out its off-balance sheet derivative instruments Correct Answer Incorrect Answer
      E Under no circumstances, as the 20% limit represents an absolute, unyielding structural ceiling Correct Answer Incorrect Answer

      Solution

      A standard Upper Layer entity can utilize a board-approved flexibility buffer of an additional 5% of its eligible capital base over the 20% baseline, provided that this extra credit exposure is strictly directed toward infrastructure development projects.

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