RBI/2004/245

DBOD No. BP. BC. No.91/21.01.002/2003-04

June 15, 2004

All Scheduled Commercial Banks (excluding RRBs)

Dear Sir,

In terms of guidelines issued vide circular DBOD.BP.BC.103/21.01.002/98 dated October 31, 1998 risk weights on investment in bonds/ debentures of select PFIs were prescribed at 20 per cent. Banks were also advised that exposures to corporates, which are guaranteed by select PFIs, would tantamount to exposure on those PFIs for capital adequacy purposes and would consequently attract a risk weight of 20 per cent.

2. In this connection, a reference is invited to paragraph 118 of the annual policy Statement for the year 2004-2005 enclosed to the Governor’s letter No. MPD. BC.249/07.01.01.279/ 2003-04 dated May 18, 2004 (copy of the paragraph enclosed). Accordingly, banks are advised that with effect from April 1, 2005, exposures to all PFIs would attract a uniform risk weight of 100 per cent towards credit risk.

3. Please acknowledge receipt.

Yours faithfully,

(C R Muralidharan)

Chief General Manager-in-Charge