Prudential Norms -Risk Weights for Computation of CRAR — THE RESERVE BANK OF INDIA ACT, 1934

Prudential Norms -Risk Weights for Computation of CRAR I. A . Funded Risk Assets I. B. Off -Balance Sheet Items The credit risk exposure attached to off-Balance Sheet items has to be first calculated by multiplying the face amount of each of the off-Balance Sheet items by 'credit conversion factors' as indicated in the table below. This will then have to be again multiplied by the weights attributable to the relevant counter -party as specified above. Note: At present, Primary Urban Cooperative Banks may not be undertaking most of the off balance sheet transactions. However, keeping in view their potential for expansion, riskweights are indicated against various off balance sheet items, which, Primary Urban Cooperative Banks may undertake in future. II. Additional Risk Weights (applicable to Authorised Dealers only) 1. Foreign Exchange and Interest Rate related Contracts 1.1 Foreign exchange contracts include the following: (a) Cross currency swaps (b) Forward foreign exchange contracts (c) Currency futures (d) Currency options purchased (e) Other contracts of a similar nature 1.2 Interest rate contracts include the following: (a) Single currency interest rate swaps (b) Basis swaps (c) Forward rate agreements (d) Interest rate futures (e) Interest rate options purchased (f) Other contracts of a similar nature 1.3 As in the case of other off -Balance Sheet items, a two-stage calculation prescribed below shall be applied: (a) Step 1 The notional principal amount of each instrument is multiplied by the conversion factor given below: When effective bilateral netting contracts as specified in paragraph II.3 of this Annex are in place, the conversion factors, as mentioned in the below table, shall be applicable 7 : (b) Step 2 - The adjusted value thus obtained shall be multip