India’s bespoke Basel rules leave foreign banks feeling exposed

End of non-cleared derivatives exemption leaves local branches scrambling for capital

Indian exception: Central bank imposed lower exposure ratio than other jurisdictions

Foreign banks in India have had to cut back trading or inject more capital into their local branches since an exemption for non-cleared derivatives in the country’s large exposure framework (LEF) ended last October.

LEFs, established under the auspices of the Basel Committee on Banking Supervision, broadly limit a bank’s biggest single counterparty exposure to 25% of its Tier 1 capital. However, India’s limit is 20% and, unlike in many other countries, it applies to exposures involving foreign