DBOD. BP.No.12048/21.04.141/2009-10

January 8, 2010

All Commercial Banks
(excluding RRBs and LABs)

Dear Sir,

Discussion paper on Regulation of Off-Balance Sheet Activities of Banks

Please refer to the Para 147 of the Annual Policy Statement for 2009-10 wherein it was proposed to issue a paper on prudential issues in bank’s floating and managing private pools of capital for eliciting public comments.

2. The recent global financial crisis has inter alia highlighted the role played by the private pools of capital (PPC) and the off-balance sheet vehicles established by the banks, in spreading and aggravating the impact of the crisis and the need for greater oversight over Large and Complex Financial Institutions w.r.t their involvement by way of sponsorship and management of private pools of capital.

3. In view of the above, the consequent international activity to strengthen the accounting and regulatory framework in this regard and the increased interest in sponsoring and managing private pools of capital like venture capital funds and infrastructure funds shown by the banks in India, it is necessary to put in place an appropriate prudential framework for regulating banks’ off-balance sheet activities.

4. A Discussion Paper on the subject is annexed for comments from the banks and general public. To facilitate a structured response to various issues, the Discussion Paper lists specific ‘questions’ on various relevant issues. However, comments on any other issues not listed as questions may also be furnished. The comments may please be sent to the Chief General Manager-in-Charge, Department of Banking Operations and Development, 12th Floor, Central Office, Reserve Bank of India, Fort, Mumbai -400001 by February 28, 2010. The comments may also be sent through e-mail.

Yours faithfully,

(B. Mahapatra)
Chief General Manager