Banks are expected to monitor their exposure to commercial real estate (which has been defined in detail) so as to limit the risk of any downturn in this sector. Although no regulatory limit is specified in this regard, RBI keeps a close watch on each bank’s exposure to the CRE sector through off-site surveillance and initiates corrective actions as necessary. Investment portfolio 15.
In the year 2000, the RBI conducted a stress test of the banks’ investment portfolio in an increasing interest rate scenario, when the general trend then was of decreasing interest rates. At that time, banks in India were maintaining a surrogate capital charge for market risk, which was at a variance from the Basel norms.