09 July 2012
The Chief Executive Officers
Foreign Banks Operating in India
Prudential Guidelines on Capital Adequacy – Treatment of Head Office Debit Balance – Foreign Banks
A reference is invited to the paragraph 4.2.3 – Notes (iv) of the Master Circular on Capital Adequacy and Market Discipline- New Capital Adequacy Framework (NCAF) dated July 2, 2012, wherein it is mentioned that ‘the net credit balance, if any, in the inter-office account with Head Office/overseas branches will not be reckoned as capital funds. However, any debit balance in the Head Office account will have to be set-off against capital.’
2. A few banks represented that debit balances in the Head Office account due to placements with the Head Office/overseas branches may happen as a part of normal banking business and complete denial of such exposure may not be practical and consistent with the principle of non-disruptive regulation. Accordingly, the matter has been examined and it is advised that:
3. These guidelines will be effective from September 30, 2012.
Chief General Manager-in-Charge