India cbank issues draft norms on banks' exposure

MUMBAI, May 30 (Reuters) - India's central bank on Friday released draft guidelines pertaining to exposures by banks in select sectors as well as their off-balance sheet exposures.

The guidelines in case of exposures to select sectors include additional risk weightage and provisioning requirements, the Reserve Bank of India said. Off-balance sheet exposures include interest rate and foreign exhange derivatives transactions.

Banks will have to use the "current exposure method" to compute their credit exposures in interest rate and foreign exchange derivatives transactions and gold, the Reserve Bank of India said in a statement.

The apex bank has defined "current exposure method" as a sum of current credit exposure and potential future credit exposure of these forward contracts.

It has posted the draft guidelines on its Web site www.rbi.org.in and has invited comments within two weeks.

The central bank also said any restructuring of derivatives transactions, including foreign exchange contracts, should be carried out only on cash settlement basis.

Many Indian firms use derivatives to hedge their currency exposure.

The Bank for International Settlements's 2007 triennial survey showed daily turnover in India's over-the-counter foreign exchange derivatives soared to $24 billion from $3 billion in 2004.

The RBI also said any amount receivable by banks, which is due for more than 90 days, will be classified as non-performing assets. (Reporting by Kaustav Roy; Editing by Prem Udayabhanu)