RBI revises draft guidelines on banks' commercial real estate exposure

The Reserve Bank of India (RBI) has revised the draft guidelines relating to risk management, reporting requirements and balance sheet disclosures in respect of real estate exposure of banks.

RBI has asked banks to report all their direct and indirect exposures to real estate sector.

Under direct exposure, banks will have to report lendings to `residential mortgages', ie, lendings fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented; (banks will have to show individual housing loans up to Rs15 lakh separately).

They will also have to report exposure to commercial real estate, including lendings secured by mortgages on commercial real estates (office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space, hotels, land acquisition, development and construction, etc). Exposure would also include non-fund based (NFB) limits and investments in mortgage backed securities (MBS) and other securitised exposures in - residential, commercial and real estate.
 
Under indirect exposure, banks have been asked to report fund-based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs).

RBI said it would advise banks separately in regard to the reporting requirement.

Further, banks may disclose their gross exposure to real estate sector as well as the details of the break-up in their annual report.

RBI has placed the draft guidelines its website vide circular No. DBOD.BP.No. 11021/08.12.015/2008-09 dated January 7, 2009 for comments of banks and general public.

The comments may be sent through e-mail to chief general manager-in-charge, Department of Banking Operations and Development, at Reserve Bank's Mumbai office by 16 July 2009, RBI said in its notification.