| According to banking sources, the provisioning for incremental standard assets created in these sensitive sectors may be hiked from 0.40 per cent to 1 per cent. This follows banks' aggressive disbursement of real estate, home and personal loans. |
| Currently, if a bank creates a standard asset of Rs 100 in any sector, it has to provide 40 paise. Under the proposed norms, banks will have to provide Re 1. |
| In July 2005, the RBI had hiked the risk weightage on standard assets in real estate and the equity market from 100 per cent to 125 per cent. The measures were aimed at reining in banks' over-exposure to these sectors. |
| The capital market advances by banks for the year 2005 was to the tune of Rs 4,832 crore against Rs 4,139 crore in 2004. Similarly, in real estate, banks' advances for 2005 were Rs 26,600 crore against Rs 17,355 crore the year before. Analysts expect banks' exposure to both these sectors to grow substantially in 2006, figures for which are not available yet. |
| Banks' exposure to real estate includes fund-based and non-fund based exposure secured by mortgages on commercial real estate and investments in mortgage-backed securities and other securitised exposures. |
| Commercial real estate is defined as office buildings, retail space, multi-purpose commercial premise, multi-family residential buildings, multi-tenanted commercial premise, industrial or warehouse space, hotels, land acquisition, development and construction. |
| Capital market exposure is defined as direct investment by a bank in equity shares, convertible bonds and debentures, and in units of equity oriented mutual funds. |
| It includes advances against shares to individuals for investment in equity shares, including initial public offers and employee stock options, bonds and debentures, and units of equity oriented mutual funds. |
| Secured and unsecured advances to stock brokers and guarantees issued on behalf of stock brokers and market makers also come under its purview. |
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