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    Question

    The central bank has eased the credit concentration risk

    norms for non-banking finance companies in the middle layer (ML) and base layer (BL), bringing them on a par with their larger peers, or upper layer (UL) lenders.With reference to the information provided above,choose the correct statements - I.The RBI said that NBFC exposure to the central government, state governments which are eligible for zero percent risk weight under capital regulations, exposures where the principal and interest are partially  guaranteed by the government of India will be among those that are exempt from concentration limits. II.Cash margin or security deposit held as collateral on behalf of the borrower against the advances, central government guaranteed claims which attract 0% risk weight for capital computation and state government guaranteed claims which attract 20% risk weight for capital computation can also now be offset with the NBFC ML exposures. III.Also, guarantees issued under the Credit Guarantee Schemes of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) and individual schemes under National Credit Guarantee Trustee Company Ltd (NCGTC) will not  be allowed to be exempt from NBFC ML exposure.
    A Only I Correct Answer Incorrect Answer
    B Only I and III Correct Answer Incorrect Answer
    C Only II Correct Answer Incorrect Answer
    D Only II & III Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    The RBI said that NBFC exposure to the central government, state governments which are eligible for zero percent risk weight under capital regulations, exposures where the principal and interest are fully guaranteed by the government of India will be among those that are exempt from concentration limits. Cash margin or security deposit held as collateral on behalf of the borrower against the advances, central government guaranteed claims which attract 0% risk weight for capital computation and state government guaranteed claims which attract 20% risk weight for capital computation can also now be offset with the NBFC ML exposures. Also, guarantees issued under the Credit Guarantee Schemes of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) and individual schemes under National Credit Guarantee Trustee Company Ltd (NCGTC) will also be allowed to be exempt from NBFC ML exposure.

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